Revision of the withholding tax: what you need to know if you are an expat
The new law on the revision of the withholding tax came into effect on the 1st. January 2021 and affects all income received during that year. All withholding tax payers, both expatriates and Swiss residents will be able to file a tax return and will be entitled to the same deduction possibilities as a normal taxpayer. But this revision also implies some changes, especially in the form of rectification of the tax at source. Here is an overview.
Since the 1st January 2021, Swiss taxpayers can request that their income tax be deducted at source, as is the case for cross-border workers for example. The revision of the withholding tax law aims to put all taxpayers on equality. This is why the law introduces the concept of subsequent ordinary taxation. Indeed, thanks to this system, taxpayers can obtain all deductions that are not included in the tax scales. From now, the usual tax deductions, such as those for the pension provision, childcare expenses or alimony, will be taken into account in the following year’s tax return and no longer on the current year’s tax base.
Who can benefit from the subsequent ordinary taxation?
Taxpayers who are resident in Switzerland can choose this new tax deduction method. They have to apply to the tax authorities before March 31 of the year by filling in the form provided for this purpose and available on the websites of the different cantons. Expat and international workers can choose this new system but only if they have the status of quasi-resident, which means that 90% of the household income comes from Switzerland.
The subsequent ordinary taxation is suitable for all types of taxpayers, but beware: there is no turning back. Once you have chosen this model, you will remain subject to it even if it turns out to be less interesting for you
Subsequent ordinary taxation is mandatory in certain cases
The subsequent ordinary taxation is mandatory for taxpayers whose gross income subject to taxation at source exceeds CHF 120’000 at the federal level (the threshold is currently CHF 500’000 in Geneva per couple), or who have income not subject to taxation at source, or who have taxable assets. Until now, the ordinary taxation of persons taxed at source mainly concerned owners of real estate and taxpayers subject to wealth tax.
Withholding tax adjustment form
On the other hand, taxpayers subject to withholding tax and residing in Switzerland will no longer be able to claim the deductions to which they were entitled until now via the withholding tax rectification form. Any request for rectification of the 2021 tax assessment, for example the inclusion of other income and deductions, can only be notified in 2022. With a deadline of March 31, 2022. So be careful to be on time. This type of request can be made online or by means of a form available at: www.ge.ch/c/iso15.
In short, between January and March 2022, you will be able to make a request to rectify your withholding tax, particularly in the event of a change in your situation that was not considered during the year or a change in rates and scales, or a request/announcement for a later ordinary tax assessment to claim your actual expenses or certain deductions.
Prevention is better than cure
As expatriate or as resident, this revision of the withholding tax can raise many questions for you. Do not hesitate to consult the documents available on the State of Geneva website. And of course, Uzunov Consulting is at your disposal to guide you in this direction.