What type of taxation applies to your situation?

In Switzerland, fiscal rules depend on the type of permit you hold, your salary and the canton where you work. Foreign employees living in Switzerland, who benefit from a B or L permit are in principle taxed “at source”, which means that the employer directly withholds the taxes from the employee’s salary at rates set forth by the Cantonal Tax Administration. This simplifies a lot the taxation procedure for both the fiscal authority and the employees who might not understand Swiss taxation system at first sight. In Geneva, cross-border workers who go back home every day or at least once a week are also concerned (art. 91 LFID).

No income taxes are withheld from the salaries of Swiss nationals and employees holding a C permit; they have to submit a tax declaration following the ordinary taxation procedure. Foreign employees married/in a registered partnership and lawfully sharing the same household with a Swiss national or a C permit holder, are treated the same way as their partner and are therefore not subject to taxation “at source” even if they fulfill the conditions previously mentioned.

“AT SOURCE” TAXATION DETERMINATION

The taxation “at source” is calculated based on the entirety of the employee’s gross salary including benefits received in kind and incidental income (art. 32 §3 LHID). The taxation is progressive except for less important incomes and the scales vary a lot from one Canton to another.

For fairness reasons, general compulsory social contributions* as well as other individual contributions of the employee (ex. 3rd pillar contributions) are deducted from the taxation calculation.

In Geneva, the employee’s family situation (ex. child care expenses) is also taken into account in the overall taxation determination.

NB: an affiliation to a health insurance company (LAMal) is also compulsory for Swiss residents. They have to comply with this obligation within three months upon arrival/birth in Switzerland. Premiums are to be taken in charge exclusively by the employees, even though some employers may contribute to the costs on a voluntary basis. Cross-border workers, living in another country but working in Switzerland, can subscribe to such an insurance in one of the two countries.

* AVS (old-age pension scheme), AI (disability insurance), APG (insurance against loss of earnings), LPP (occupational pension scheme), AC (unemployment insurance), AA (accident insurance) and AM (maternity insurance).

SPECIFIC CASES

“At source” taxpayers might in addition be subjected to the ordinary taxation regime and, therefore, might have to submit a regular tax declaration.

This is the case when the gross salary exceeds a certain threshold currently set at CHF 500 000.-/year in Geneva and CHF 120 000.-/year at the Federal level. Such a complementary ordinary taxation is also due when a person receives another income arising out of an independent activity.

NB: in Geneva, a switch from the “at source” taxation regime to the ordinary one occurs when the concerned person possesses a real estate property.

 

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