Can You Claim A Tax Rebate?

by Guest Post on March 9, 2015

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Foreign employees resident in Switzerland are generally subject to tax at source on their Swiss employment income. In other words, the employer deducts the applicable source tax rate directly from the monthly gross income and forwards it to the tax authority.

Annual employment income > CHF 120’000

If the annual gross income is above the threshold of CHF 120’000 the tax authority asks the foreign employee to complete a tax return based on the world-wide income and net wealth (so called retrospective ordinary tax assessment). The tax levied at source will then be credited against the ultimate tax liability.

Annual employment income < CHF 120’000

Foreign employees with an annual employment income below the threshold of CHF 120’000 only need to file a tax return if their annual income – other than Swiss employment income – such as dividend income, rental income, etc. amounts to at least CHF 2’500 and/or if the world-wide net wealth equals or is higher than CHF 200’000. Foreign employees reaching these thresholds will not be asked to file a tax return. They will need to be proactive in order not to evade Swiss taxes on this particular income and/or net wealth respectively.

Swiss employment income will remain subject to source tax. However, there is a possibility to apply for reassessment of source tax. The applicable source tax rate considers deductions for occupational expenses, insurance premiums and family allowances on a flat rate basis. Hence, if you incurred costs in 2014 that are not covered by the flat rate basis deduction – such as debit interest, pension fund payments, contributions to the so-called pillar 3a, alimony payments, childcare costs or higher effective occupational expenses – you may possibly claim refund. Furthermore, if you qualify as an expat according to Swiss tax law you may possibly ask for a deduction of further occupational expenses such as fees for a foreign-language private school for your children.

Such application for reassessment of source tax has to be filed no later than 31 March, following the tax year. In other words, applications to amend the 2014 source tax rate need to be filed by 31 March 2015 at the latest. An extension of the deadline is not granted.

Individual analysis required

The above is a general outline of the source tax regime, which however does not apply with regard to some specific situations. For example if your family lives abroad you might not be subject to a retrospective ordinary tax assessment despite an annual income of more than CHF 120’000. For employees with a very high income this may be beneficial as the source tax rate is lower in the highest tax bracket than the ordinary tax rate. Furthermore, once a foreign employee acquires a permanent resident permit (so called C-permit), Swiss citizenship or marries a Swiss national or a C-permit holder, source tax no longer applies.

Thus, each case needs to be analysed on an individual basis in order to determine what tax regime will be applicable and whether a refund of source tax may possibly be claimed.

 

Severine Vogel, Staiger, Schwald & Partner
Attorney-at-Law, MLaw, LL.M., Certified Tax Expert
severine.vogel@ssplaw.ch
Telephone +41 58 387 80 00

Staiger, Schwald & Partner is a full-service law firm based in Zurich and Berne. The tax team advises private clients on all tax matters. We have great expertise with regard to international clients living and working in Switzerland. We prepare tax returns, advise private clients relocating to Switzerland with regard to tax, social security and residence permit issues, obtain rulings from the tax authorities as well as analyse, design and implement tax efficient structures. Furthermore, we have great expertise in the taxation of trusts and foundations and also advise private clients regarding estate and succession planning. If you have any questions please feel free to contact us.

Legal note: This article was prepared with due care. However, it does not constitute legal advice. As such, you may not rely on it for any purpose and any liability for the accuracy, correctness or fairness of the contents is explicitly excluded.

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