Withholding tax on employment earnings

What is subject to withholding tax:

Wage income + substitute income

Who is subject to withholding tax:

Employees of a Swiss company, permanent establishment or fixed establishment without a permanent residence permit (C permit)

Also subject to withholding tax on income from employment (DBG Art. 91 para. 1)

1. Cross-border commuters
2. Weekly residents
3. Short-term residents

Who is not subject to withholding tax:

Spouses if one of the two persons is a Swiss citizen or has a permanent residence permit.

Which tariffs apply:

With residence permit (B permit):

A: Single person (children/denomination e.g. AOY)

B: Married (only one employed)

C: Married (double earner)

F: Cross-border commuters from Italy (for Canton TI,VS,GR)

H: Single parents or dependants

For cross-border commuters to neighbouring countries

L: Single people

M: Married (one employed)

N: Married (double earner)

P: Single parent

In which canton is the withholding tax charged:

In the employee's canton of residence

Which information is required to determine the correct tariff? Please request our personnel questionnaire.

In general, tariff codes L, M, N and P apply to cross-border commuters from neighbouring countries (whatever their nationality). As a rule, these employees return to their place of residence every day.

Exception Germany:

The condition for the application of a cross-border commuter rate limited to a maximum of 4.5% for employees from Germany is: a certificate of residence from the German tax authorities: Form "Gre-1" or the form for extensions: Form "Gre-2"
With the authorisation, a maximum of 4.5% cross-border commuter tax for cross-border commuters resident in Germany will be taxed in Switzerland if they return to their place of residence in Germany every day.

Exception for non-daily return:

Employees resident in Germany who are prevented from returning to their place of residence in Germany for work-related reasons on more than 60 working days per year (so-called non-return days) are not considered cross-border commuters and are taxed according to the ordinary withholding tax rates (tariff codes A, B, C, E and H). These work-related non-return days must be certified using an official form (Gre-3, employer's certificate of non-return days in excess of 60 days within the meaning of Article 15a paragraph 2 DTA-D and the negotiation protocol of 18 December 1991). The form must be submitted to the competent cantonal tax administration. The cantonal tax authorities, or the employer on their instructions, will recalculate the amount using the applicable rate. Under- or overpaid withholding tax will be reclaimed or refunded. 

Remuneration of the Board of Directors

Board of Directors' remunerations (e.g. bonuses, attendance fees, fixed remunerations, monetary benefits from employee shareholdings) are taxed at source together with any salary payment in accordance with Article 83 DBG, as long as the entitled member of the Board of Directors or management is resident in Switzerland.

If members of the Board of Directors are resident abroad, the withholding tax on the compensation of the Board of Directors must be applied in accordance with Article 93 DBG. It should be noted that compensation paid to board members resident abroad may be taxable at source in accordance with both Article 91 DBG (salary income) and Article 93 DBG (compensation paid to board members). The tax liability in accordance with Article 91 DBG applies if the compensation is paid for operational activities (e.g. management tasks). Only remuneration for supervisory functions is subject to withholding tax according to Article 93 DBG. If a person subject to withholding tax is simultaneously liable for withholding tax in accordance with Article 91 DBG (salary) and Article 93 DBG (compensation of the Board of Directors), this does not result in a correction of the rate-determining income for salary income.

Examples:

1. Member of the Board of Directors R. is resident in Switzerland and in March receives a gross salary of CHF 10‘000.00 in addition to the remuneration of CHF 5‘000.00. The total income (= CHF 15‘000.00) is therefore subject to withholding tax (ordinary tariff codes) in accordance with Article 83 DBG.

2. Same situation as before with the difference that the member of the Board of Directors is resident abroad. As a result, the gross salary is subject to withholding tax in accordance with Article 91 DBG (ordinary, progressive rate code) and the board member's fee separately in accordance with Article 93 DBG (linear rate).

If artists, athletes and speakers who are resident abroad are employed for less than 30 days ( one-off or single performance), they are subject to withholding tax in accordance with Art. 92 DBG. See ESTV information sheet.