Quellensteuer

[Jd.l]

Hi All,

I am quite confused by the Quellenseuer calculations I see on my payslip. My employer shows a tax deduction from my salary and to calculate it, they are using the Gross salary. So, basically I pay WHT on Pillar 1 and Pillar 2. This is confusing and surprising, as I thought until now that both are not Taxable and should be excluded from Net taxable income.

Am I wrong or do I miss something?

Thank you!

 

[Baptiste Wicht]

Hi

Indeed, tax at source is calculated on the gross income rather than the net income. This is a major difference between both systems. The entire calculation is different for each canton and always different from the "standard" tax calculation.

If you do a tax declaration (once you have 120K CHF gross income), you will then get tax on your net income, based on a totally different calculation.

 

[Jd.l]

Thank you, Baptiste. I was not able to find an answer anywhere, but the rate that is then applied, is it somehow lower than the rate that is used for the normal taxation? In my mind, if it is not, then people, who pay Quellensteuern overpay in taxes, no? Pillar 1 and Pillar 2 are like 11% of my salary deductions.

 

[Jd.l]

Thank you, Baptiste. I was not able to find an answer anywhere, but the rate that is then applied, is it somehow lower than the rate that is used for the normal taxation? In my mind, if it is not, then people, who pay Quellensteuern overpay in taxes, no? Pillar 1 and Pillar 2 are like 11% of my salary deductions.

I think I found the confirmation of what I fought.

“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. Withholding tax rates are always lower than the ordinary rate. It already contains most of the deductions that you would have claimed if you had completed your tax return.

The taxation at source has its own scales. It remains to be determined which one you fall into.”

Tax - Switzerland: How is withholding tax calculated?

Would you like to better understand the consequences between taxation at source and subsequent ordinary taxation (the TOU)? Check out this article.

fbk-conseils.ch

 

[Max]

If you think you are taxed unfairly and don't have 120K, make a payment into pillar 3a - then you will be entitled to a normal tax declaration, since 3a contributions are deductible.

 

[Jd.l]

Well, I have to do the tax return anyway. I don’t do it myself, but I want to know how to do it and all specifics. What surprised me last year is that I had to pay more in the final calculations than what was deducted from my salary during the year.

So, I simply want to be ready for this year’s final calculations and try to understand the whole thing myself.

 

[Baptiste Wicht]

If you think you are taxed unfairly and don't have 120K, make a payment into pillar 3a - then you will be entitled to a normal tax declaration, since 3a contributions are deductible.

That's only if you do a full tax return. And doing that may result in higher taxes, even after taking the 3a contribution into account. So it's not an easy decision.

 

[Jd.l]

That's only if you do a full tax return. And doing that may result in higher taxes, even after taking the 3a contribution into account. So it's not an easy decision.

That’s what I understand now. The outcome of the Tax return form might be better, but to assume that it will always be better is wrong. Before moving from Quellensteuern to a normal Taxation, I would run a calculation to see if it is really worth moving from one to another.

 

[Max]

That's only if you do a full tax return. And doing that may result in higher taxes, even after taking the 3a contribution into account. So it's not an easy decision.

My comment was to mention a tax return opportunity below 120K, perceived unfair taxation assumed. As I got to know afterwards, there is no question about the uneasy decision: "Well, I have to do the tax return anyway."

 

[Max]

Before moving from Quellensteuern to a normal Taxation, I would run a calculation to see if it is really worth moving from one to another.

How are you going to keep Quellensteuer in case it is not worth moving to regular taxation?

 

[Jd.l]

How are you going to keep Quellensteuer in case it is not worth moving to regular taxation?

In case you are above 120k, you have no choice. In case you think your Quellensteuern are not fair, you can always run your own calculations via the Tax office simulator. You can then decide if you should consider moving to a normal process or not

 

[Max]

In case you are above 120k, you have no choice. In case you think your Quellensteuern are not fair, you can always run your own calculations via the Tax office simulator. You can then decide if you should consider moving to a normal process or not

I'm afraid, I don't quite understand. You wrote that you "have to do the tax return anyway". Based on that I assumed that you have no choice.

 

[Jd.l]

I'm afraid, I don't quite understand. You wrote that you "have to do the tax return anyway". Based on that I assumed that you have no choice.

Sorry. I might have confused you. Yes, I do have to do the Tax return, but I have the Permit B, so my employer is deducting Quellensteuer from my salary. As I am trying to understand both sides, like why my employer was calculating the Tax from the Gross salary and how the normal taxation works, I asked my original question. Why Gross salary and how is it fare. Now I understand that “fairness” is taken into consideration in Quellensteuer.

The other part of my comment was that if I were to choose between direct declarations or normal declaration, I wouldn’t rush into the normal one. It is not always better. But in my case, I don’t have an option of choosing.

Just another question came to my mind. Since I am doing the Tax return, can my employer stop reducing WHT from my salary?

 

[Max]

But in my case, I don’t have an option of choosing.

Ok.

Just another question came to my mind. Since I am doing the Tax return, can my employer stop reducing WHT from my salary?

I would say, he will stop only after the conditions for taxation at source are no more vaild - i.e. you obtain the C permit.