Hello,

I left Switzerland in 2011 having worked only the first three months of the year. My accountant is telling me my annual tax rate is calculated based on an extrapolation of these three months worked, which happens to include "13th month" salary, a 6-monthly bonus, and some payout on leaving the company.

This means my tax rate has been calculated in the top bracket for 2011 as my income from these 3 months is disproportionately high.

I'm pretty unhappy about this as my accountant previously told me I'd get money back for only having worked 3 months of the year.

What of what I've been told is correct and what's wrong??

Thanks in advance.

Mark (VD)

If you were paying under Quellensteuer and your annualized income was less than chf 120k, then perhaps yes.

Otherwise, I fairly certain your accountant is wrong. Unless your new country has some very strange tax treaty with Switzerland.

My understand of what should happen is you file two tax returns. One to Switzerland for the 3 month period where they treat that as your full year income, and refund your tax overpayment as appropriate. The second to your new resident country, where they will reflect your Swiss income/tax based upon their tax treaty.

The OECD standard is to apply the marginal tax rates for the 9 month income starting upwards from the earned total of the 3 month. Noting that you will not pay taxes for that 3 month period in e new country, since you've already paid in Switzerland.

Swiss Tax rises with every 1,000 earned rather than brackets, your income for 3 months would need to ba about 60k to hit the top of the scale.

I expect your accountant is correct, you will have to pay more tax in CH. Depending on where you go & your earnings you may well have further tax to pay if you returned to the UK for example.

Thanks for your reply.

A bit more info:
- I was paying "Tax at Source" if that's what you're referring to
- My salary was above 120k and I filed a tax return each year - which is why I have an accountant
- I'm now in Australia where the financial year starts from 1st July and I didn't work between then and leaving Switzerland (ie: I had an employment gap between March - July).

My partner was also working in Switzerland, and earned a higher salary than me, so "Tax Schedule D" applied to my income, which my company had failed to take into account and which my Accountant had failed to advise me of until last month - hence why I would have to pay additional tax even under normal circumstances.

My beef is with this final year where I only worked 3 months but I still have to pay a large amount of additional tax.

Cheers,
Mark

It works like this:

The annual income for determining your tax rate is the earnings over the 3-months, annualized.
Eg: if you earned 10k each month, in 3 months you earn 30k, in 12 months you would have earned 120k (30k x 4).
So the tax rate is based on the 120k effective annual income
If the tax rate was 20% on 120k, you'd pay 24k tax.

BUT you only worked 3 months, so the 20% tax rate would be applied to the 3 month income of 30k: 30k x 20% = 6k tax

Of course, add in to the above all your income from interest and dividends, all your deductions, etc

And it is correct to annualize the 3-month amount earned, including proportion of 13-month salary, and any special bonuses. The annualized income is simply be 4x the income in that 3 month period.

And also: you pay tax until when you deregistered in Switzerland.
The Swiss tax authorities don't care when you start living and working in another country. They only tax you until your Swiss deregistration date.

So the critical points are:
1. ALWAYS deregister the day you leave the country. Not later!
2. Try and finalize the tax the week before you leave. That's what I did. You'll have all your info fresh in your mind, all papers necessary, etc. Trying to do it 12 months later from another country is much much more difficult.

So you worked for 3 months & left, so it's not unreasonable to tax you correctly for the high level of income you received.
Average family income in CH is about 60k, sounds like you & you partner were were earning more than 4 times that, not sure the sympathy angle will work here.

Clearly in this case, it was to the OP's disadvantage to do that!

Did you deregister immediately you left Switzerland? What you did after you deregistered is irrelevant.

Look at the plus side: you have paid too low a tax in the past. The money you should have paid the tax dept was sitting in your account, and you were able to use that money for other purposes, and have enjoyed the use of it (I trust)

Had the tax rates been correctly applied, you would have paid more in the past and have had less money to use.

NOTE: the tax dept has every right to correct any incorrect tax rates for past tax returns and demand you pay any outstanding amounts due, UNLESS they have declared your tax return final.

Think about it this way - would you prefer to be in our position? We pay a lot less tax as when we arrived here in Ch 3 years ago- Hurrah!

That is because due to the exchange rate we have lost almost 50% of our income since arrival. Boohoo! (but I wouldn't dream of complaining).

Indeed, my personal ambition is to pay 1 million CHF tax a year.

1. Yup deregistered when we left.
2. Couldn't finalise our taxes until our companies sent our salary certificates which wasn't until after the end of 2011 tax year.

Anyway you've all pretty much confirmed my fears - that I'll just have to suck it up and pay the taxes. Just would have been nice if my accountant had properly explained all this up front so I could have made the appropriate adjustments or provisions.

Thanks,
Mark

Sorry, I just don't quite get what your accountant apparently said and some of the responses posted here.

There are two things to consider
1. your source tax rate - this will indeed be proportional to your monthly earnings annualised, which can make it seem 'high'. But this is not your due taxes, but effectively a witholding against due taxes.

2. your actual tax rate - this, as you should already know (having previously filed tax returns and having an accountant) is based on you actual earnings between 01-Jan and 31-Dec and your wealth. So your actual tax rate is based on 3 months earnings spread over 12 months, which yields a low rate. So file a return and claim back the difference...what else is there to consider....and fire your accountant...

The tax year you are complaining about is 2012, as I understand it. As you complete a tax form each year, despite being taxed at source, surely you will be able to rectify the situation and get a rebate for 2012 when you complete this year's from in approx February 2013??

This assumes you can get your form forwarded to Oz. I would contact your tax office directly and dump the accountant...

Anyone on a b-permit paying tax at source who is either a contractor or a full time employee who gets an annual bonus will experience different rates of tax depending on earnings for a particular month. I remember my first ever bonus and being almost in tears when I realised that they added my monthly salary to the bonus amount, multiplied it by 12 and then taxed me as if that was my annual income. The important thing to note here is that while on a b-permit (which I've managed to have for 12 straight years now, but thats another story) I have *always* had a tax rebate in the years I've had a bonus.

The swiss tax authorities are, predictably, 100% fair* and at the end of the day you'll pay exactly what you should have and not a penny more. And if you get a rebate they're kind enough to pay you interest on the money you are owed.

Pay your taxes but I'll wager you'll get a refund.



* doubtless many people will disagree with this statement, but chances are most of them have been misled or poorly informed about tax rules. I was once apologised to in person by two separate people at our local tax office after they erroneously sent me a tax bill. I reckon they'd have committed hara-kiri had they not been so desperate to ensure it never happened again.

Yeah that's what we were initially led to believe and now are being told differently - that actually the rate is calculated based on an extrapolation of the 3 months worked over the 12 month period.

I think the key points here are:
- file my return
- fire my accountant

If you lived here for 3 months then you will pay the same tax as if you earnt 4 times as much and lived here for a year. It seems totally fair to me!

Doesn't seem fair at all. He should pay tax ON THE THREE MONTHS' EARNINGS at the same percentage as if he had stayed on that salary all year.

Source tax should for the most part take care of it. So it might be a small difference that has to be paid to the tax authorities and that is if only you have to file. Thats the advantage of the B permit in that most of it is paid at source. Not sure if they have lowered or raised the source tax rates in the last 5 years.

Sorry I have no idea what this means. Are you answering the correct thread??

Thats exactly what the poster said.