Subsequent ordinary assessment for all persons subject to withholding tax who are domi-ciled in Switzerland beginning from the tax period 2021

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published on 17 November 2021
     

The revision of the withholding tax, which came into force at the beginning of 2021, enables all foreigners without a C residence permit (if they are domiciled in Switzerland) a ordinary tax assessment for the first time. For taxpayers with an annual gross income of less than CHF 120,000, the reform may offer new potential for savings.
    

    

 

Idea of ​​the reformed Withholding Tax

In contrast to the previous years, all taxpayers can now submit an application for an ordinary assessment even with an income of less than CHF 120,000. As of the 2021 tax period, there will be no additional tax assessment. Likewise, there is no possibility of a tariff correction due to special expenses. Only a simple correction of the applicable tariff is allowed, for example due to errors with the children or marital status.

 

Which taxpayers can benefit from the new withholding tax regulation

There are different constellations in which a voluntary ordinary assessment promises a high tax refund. We have listed a few cases below. However, no general conclusion can be made about the effects of a proper assessment. Each case must be observed individually and requires personal advice. The binding effect should also be mentioned. After the one-time voluntary ordinary assessment, you are obliged to submit a tax return every year. Any factors will be relevant and may also have a negative impact on the tax assessment in the next year.
   

Examples:

Magdalena is an Austrian citizen with a B permit, single, no children. She has an annual gross salary of CHF 115,000, no other income, has assets of CHF 25,000 and lives in Kilchberg, canton of Zurich.

- Withholding tax CHF 12,869

- Ordinary assessment: Kilchberg ZH CHF 11,137
   Potential savings of CHF 1,732

 

Variation 1: Magdalena pays CHF 6,400 per year into Pillar 3a

- Withholding tax CHF 12,869

- Ordinary assessment: Kilchberg ZH CHF 9,724
   Potential savings of CHF 3,145

 

Variation 2: Magdalena moves her place of residence to the city of Zurich on October 1st, 2021 (without paying into pillar 3a)

- Withholding tax: CHF 12,869

- Ordinary assessment: City of Zurich CHF 13,580
   Additional costs CHF 711

     

Steven is a Dutch citizen with a L Permit, single, no children and has an annual gross salary of CHF 45,000 and got assets of CHF 5,000. He lives in Affoltern a. A. in the canton of Zurich

- Withholding tax: CHF 1,890

- Ordinary investment CHF 1,707
   Potential savings of CHF 183

 

Variation: Steven has debts of CHF -55,000, the interest for this is CHF 4,000 p. a.

- Withholding tax: CHF 1,890

- Ordinary investment: CHF 1,247
   Potential savings of CHF 643

    

Jane and Clay are British citizens, married with a B permit, an annual gross salary of CHF 75,000 and CHF 110,000, living in the city of Zurich. One child, 3 years old. The assets of the three people are CHF 150,000.

- Withholding tax CHF 13,069

- Ordinary investment CHF 17,232
   Additional costs CHF 4,163

 

Variation: The family lives from October 15th of the year in Wollerau in the canton of Schwyz.

- Withholding tax: CHF 13,051

- Ordinary investment CHF 10'063
   Potential savings of CHF 2,988

 

The following expenses or standard deductions were taken into account in the subsequent ordinary assessment: social security deductions 12 percent, large meals allowance of CHF 3,200, effective travel costs of CHF 3,700, other professional costs of 3 percent of the net wage at least CHF 2,000 maximum CHF 4,000. Further training costs CHF 500 , insurance premiums CHF 2,600, canton and federal level CHF 1,700, donations of CHF 300

 

Factors influencing a better or worse position when assessed ordinarily

The following circumstances can indicate a high potential for savings in the case of a voluntary ordinary assessment:

  • Residence in a tax-favorable municipality
  • Special professional expenses
  • High medical costs
  • High childcare costs
  • High debts/ interest burden
  • High travel costs or costs for special meals
  • High donations made
  • High costs further education
  • Fluctuating income or non-continuous employment during the year
  • Relocation to a low tax canton close to the end of the year
  • Purchase into pension plan / payment into pillar 3a
  • Alimony payments

       
The following circumstances speak in favor of a negative tax effect in the case of a subsequent ordinary assessment.

  • Residence in a municipality with a high tax rate
  • High wealth or high investment income

   

When a subsequent proper assessment is mandatory

As soon as a person subject to withholding tax residing in Switzerland (for example, the canton of Zurich) receives a gross salary of over CHF 120,000 pa, has worldwide assets of over CHF 80,000 (married couples CHF 160,000) or income not subject to withholding tax of over CHF 3,000, there is a general obligation for an ordinary assessment. Since married couples must always be assessed together, the mandatory subsequent assessment applies to them as soon as one of the taxpayers exceeds the income limit.
 
The taxpayer has the duty to proactively report to the municipality or tax administration.
 

What deadlines must be observed

The deadline for submitting a subsequent ordinary assessment ends on March 31 of the following year. The application must be submitted once to the tax office. In the following years a tax return must be submitted every year.
    

Conclusion

We come to the conclusion that an ordinary assessment is not always beneficial. The municipality's tax rate has the greatest impact. There is a tendency to assume that a ordinary assessment is more likely to pay off if you reside in a low tax municipality.
 
A subsequent ordinary assessment, is binding for the following years and applies until the end of the withholding tax liability.
 
If the circumstances for a mandatory ordinary assessment exist, the taxpayer must take proactive action. If he does not do this, it can be properly assessed retrospectively for up to 10 years. This may result in default interest and criminal prosecution. If the error is detected early on, criminal prosecution can be prevented through a voluntary disclosure.
 
Are you liable for withholding tax? Then we recommend that you seek advice. Let us check whether you can benefit from such an ordinary assessment or whether you are even obliged to file a tax return. Please do not hesitate to contact us. The Rödl & Partner tax team in Zurich will be happy to assist you.

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