How are withholding taxes calculated in Switzerland?
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Updated on January, 19th 2023.
The first time I filled in my tax return, I felt like I was solving a true Chinese puzzle with chivalrous music straight from the Middle Ages playing in the background.
Since then, I learnt a great deal about this topic, to the point that I am now writting blogposts to help you unveil the secrets of the Swiss taxation machine.
This article is about the functioning of taxes at source, whether you are a frontalier or not. Before you dive headfirst into reading it, make sure you are part of the workers for which taxes will indeed be withheld at source.
Eventhough it is similar on certain points – scales and deductions – the formula for the taxation at source differs from the calculation for regular taxes, which I already went over in a quick and easy guide:
The main difference: gross salary vs. the taxable income
If you were not taxed at source but according to the standard formula, the calculation would be done based on your taxable income, which is the gross income minus social insurance and authorised deductions.
Regarding the taxation at source, it is calculated based on the gross salary.
When you receive your salary at the end of the month, it is an amount net of tax.
It follows that the taxable income at source is higher than the normal taxable income. Does this mean you will pay more taxes? Not necessarily. To ensure fairness, scales were adjusted. They are not the same in the two scenarios.
The taxation at source has its own scales. It remains to be determined which one you fall into.
A / B / C / H: the four scales of the withholding tax
The scales are always represented by a capital letter and an index number.
The first one refers to your situation and the second one refers to the amount of dependants you have.
Which scale is applicable to your situation?
The A0 scale
It is useful in two situations:
- You are single or divorced, but without children.
- You are an unmarried couple (cohabiting) living in the same household: The taxpayer with the lower income will be taxed at scale A0.
The A1 – A5 scale
This scale is special because it is not directly allocated. It has to be applied for specifically by the competent authorities. It is allocated to the single person who pays alimony to his/her former spouse or child(ren).
The B0 – B5 scale
It applies to married couples (and registered partnerships) who have only one source of income for the household. One of them is not working at the moment.
The C0 – C5 scale
As with scale B, scale C is for married couples (and registered partnerships) but this time when both people are employed. Please note that this scale requires some adjustments at the beginning of the year. The spouse’s income is initially fictitious. You will then have to apply for a withholding tax adjustment (DRIS form) to correct your spouse’s salary.
The H1 – H5 scale
This is the scale for unmarried cohabitees and divorced singles with custody of the children: If you are divorced and retain custody of your children then you will apply this scale as well as if you are cohabiting and your income is higher than your partner’s.
These scales are applicable regardless of the canton in which you work or live. Some differences do exist between a number of cantons, but they are minor.
Now that you know yours, you still have to determine the calculation method and, then, the deductions possible based on your situation.
How is the amount of my taxation at source calculated?
Don’t worry, for once, we can tell you: nothing complicated.
Do you know the scale corresponding to your situation? Then you probably noticed that each income bracket refers to a tax percentage?
All you therefore have to do is determine in which bracket you are and apply the associated tax percentage to it.
As usual, let’s take an example:
Upon her arrival to Switzerland, Zoé signed her first contract in one of these big interim companies (which will not be named) that hires you on behalf of another structure that does not want risk having you sign permanent contract. She concluded an employment contract with a salary of 60,000 CHF annually.
Her payslip will indicate 5,000 CHF but she will receive only part of this sum. All the social insurances,contributions to the first and second pillar and then pay the tax at source.
In her case, the amount withheld will be of 5,000 x 11.00% = 550 CHF
A small clarification, in our example the deductions at source are calculated on a monthly basis. It is however possible for your employer to apply a higher rate in case he takes supplementary benefits into account (13th month, overtime, holidays, etc…).
If you are looking for the full scales, here they are:
Last step: deductions!
The authorised tax deductions : 2021 updates
As we just saw, the taxation at source is unique in that it is calculated on the basis of the gross income. It does not take typically authorised social (insurances) and fiscal (pillar 3, childcare expenses, professional expenses, etc…) deductions into account.
To make up for it, until the end of 2020, cantons would allow for other forms of deductions.
- The simple adjustment: a two-page form authorising for certain additional deductions, such as pillar 3 contributions and childcare expenses (but not mortgage rates, nor health insurances).
- The subsequent standard taxation (TOU) (82). Which is a special request to declare your entire income and assets and benefit from the same scales and deductions offered to people who are not taxed at source.
From 1st January 2021 onwards, the law on simple adjustment was modified and does not allow all these deductions anymore.
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