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Save taxes as a foreigner: Tax return despite withholding tax?

Did you know that Foreigners frequently in Switzerland pay less tax than the Swiss themselves?

This may be the case if they are subject to withholding tax and do not have to complete a tax return. But beware, no deductions can then be claimed. Depending on your personal situation, there may also be a large Opportunity for tax optimisation lie.

In this guide "Swiss tax return for foreigners" you can find out when it as a foreigner voluntarily makes sense, a Fill in tax return and what else you should know about taxes.

Table of contents

Withholding tax: the entry point for foreigners

Let's start with withholding tax. Foreigners with a Settlement permit (category C) must an annual tax return like all Swiss citizens.

Foreign employees without a C permitwho are not married to a Swiss partner, are normally subject to withholding tax. Withholding tax is deducted directly from the salary and varies depending on the canton.

The withholding tax already includes flat-rate deductions for professional expenses, insurance or deductions for children and married couples.

Tax return for withholding tax

If a person subject to withholding tax earns more than the Threshold value of CHF 120,000 (in most cantons), must a subsequent tax return be filled in.

The same applies if there are assets of more than CHF 100,000 and income of more than CHF 2,000 per year.

The withholding tax already paid will of course be credited for the relevant tax year.

Should these Criteria not fulfilled must be No tax return be filled in.

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Less tax thanks to withholding tax

Depending on the canton and municipality, the Tax burden will be lower due to withholding taxthan for Swiss employees, who are subject to ordinary taxation.

In this case, foreigners are not only spared the effort of filing a tax return, but are even effective tax savings. In the city of Zurich alone, this results in Tax losses of several million francs.

However, foreign employees should not simply sit back in this situation. It makes sense for many employees, voluntarily submit a tax return and thus make use of deductions.

Since 2021, all foreign employees have been able to apply for retrospective assessment for the first time.

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Voluntary tax return with B authorisation and withholding tax

There are some situations in which a Voluntary tax return despite withholding tax and, for example, a B authorisation.

Does the following apply to you?

  • You use the voluntary pillar 3a
  • You pay high training costs
  • You have long journeys to work
  • You pay alimony
  • You voluntarily buy into the pension fund
  • ...

Then you can only include these points in full in an ordinary tax return. claim deductions. In many cases this is worthwhile and should therefore definitely be considered and calculated in more detail.

Calculation: Which taxation is better?

You can make a rough calculation with the following online tax calculators yourself. This way you can find out whether the voluntary tax return is worthwhile for you or whether you are better off withholding tax.

You can use your canton's tax calculator to work out whether withholding tax at your place of residence is more favourable for you or whether you should apply for an ordinary assessment. You can find it via Google.

You can then compare this with the Withholding tax calculator draw.

Examples for the Swiss tax return for foreigners

Let's take an exemplary person who lives in the canton of Zurich lives, 30 years is old, CHF 8,500 per month earns money, is single, has no children and is non-denominational:

If you have a high income, in this example a number of additional deductions must be claimed in order to benefit from an ordinary tax assessment.

Let us therefore consider a second person who also lives in the canton of Zurich lives, 30 years is old, CHF 6,000 per month earns money, is single, has no children and is non-denominational:

In this example, the pillar 3a deductions already bring us very close to the withholding tax rate. If further education costs, long journeys to work or other deductions are then claimed, the voluntary tax return is worthwhile.

No guarantee that the calculations are up-to-date or correct.

Once you've done it, there's no going back

However, you should carefully calculate whether you would be better off with a voluntary tax return in the long term. If you have aOnce you have submitted a voluntary tax return, you must also do so in the following years.

Is it worth switching from a B permit to a C permit?

If the C permit (permanent residence permit) is associated with a tax return and thus often with higher taxes, Is it worth switching?

If you ask yourself this question, be sure to consider the Major advantages of the C licence. With a C permit, you are authorised to stay in Switzerland without restriction and have all the rights and obligations of a Swiss citizen. Only the right to vote and stand for election is excluded.

You should therefore not only take a financial view, but also a sustainable and long-term view.

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Summary and conclusion

As Foreigners in Switzerland There are various options available to you to customise your Optimise tax burden. If you are subject to withholding tax, this may be advantageous for you. However, a voluntary tax return often makes sense because deductions can then be claimed. Once you have submitted a tax return, you must also do so in subsequent years.

If you follow the tips on Schwiizerfranke and use the Pillar 3a makes sense for youyou will build up assets in the long term. Accordingly, you will then have to fill in a tax return in the long term anyway and will be taxed properly.

Here you will find an important article about All taxes in Switzerlandwhich you should definitely take a look at.

How are you currently taxed? Feel free to share your thoughts on the topic in the comments!

Sources:

FAQ

This should always be checked carefully. With higher incomes in particular, it is better to use withholding tax and even save the effort of filing a tax return.
If the tax return is completed voluntarily anyway, this will result in ordinary taxation, which may lead to an increase in taxes.

However, further deductions can be claimed with the voluntary tax return despite the B authorisation. If the deductions are sufficiently high, the tax burden will then be lower than under the withholding tax.

With a C permit, you will be taxed properly. In many cases, this can lead to higher taxes compared to withholding tax and a B permit.

9 responses

  1. What is the situation for pensioners who move to Switzerland from abroad? What tax options are available to them?

    Reply

    1. I’d be happy to write an article on that. Do you have any specific questions or topics you’d like to discuss?

      Reply

  2. I have a question. Is it possible to remain on withholding tax even with a C permit (only recently, 2 months)?

    Reply

    1. I am not aware of any such exception. To my knowledge, the change will take effect from the following month. It is best to check directly with your cantonal tax office.

      Reply

  3. Hello Eric. I'm still missing the most important information. If you have shares or custody accounts, you have to pay 35% withholding tax. Don't foreigners with shares have to make a proper tax return? Or how does that work?
    Thank you
    LG

    Reply

    1. Hello Anne,
      perhaps there are cantonal differences (and to be clear: I am not a tax expert), but as far as I know must you do not have to file a tax return as long as you do not exceed the above limits.
      Personally, I am anyway Not an advocate of the dividend strategybut that's another topic.
      If the investment income is sufficiently high and the declaration is worthwhile (see example above), the tax return naturally makes perfect sense in order to have the deducted withholding tax credited. Here is an Contribution from the Canton of Zurich on the topic.

      Reply

  4. Good contribution, thanks Eric! Attention deadline: The application for the retrospective ordinary assessment (NOV) must be submitted to the relevant tax office by 31 March of the following year. Be sure to check the website of the cantonal tax authority. You will usually also find the relevant application form there. The employer makes little effort in such matters, as tax matters are a private matter.

    Reply
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