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Old 16.08.2007, 10:44
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Thoughts on property/tax situation

Hello all,

These are exciting times. I have quit my City lawyer job and accepted a post at a major tech company in Geneva and will be relocating there in May-July next year (I will be operating from their HQ in London until then). I will be going there as a Swiss tax payer, not as a UK expat.

My wife and I have been discussing what to do about our house in Tooting during our time in GE. Three estate agents have valued it at about 700k and it's potential rentla income is about 2300 a month. The mortgage on it is currently about 2250 a month and the bank have said that we can keep it without going buy to let for anoth 2 or so years. With costs and estate agents' fees, it is more than likely that I will be making a loss, so I don't anticipate any tax liability.

My salary in CH will be about 180,000CHF. I will have a car allowance of about 1,100CHF and an annual bonus of up to 40,000CHF. I plan to live in Vaud and work in GE.

I wanted to seek some comfort from you on some questions I have:

1. If I keep the existing repayment mortgage, the only deductions I can make are the mortgage interest element (about 1200 a month), estate agents' fees (about 250) and costs (about 100 a month). Even if I am making a loss each month, I will still pay tax on the difference between 2300 and 1550 (subject to PAs). Is this right? I know circumstances differ for everyone, but I would be interested to hear from people who are in a similar sort of situation and how they deal with this.

2. I read in another thread that I will have to notify the canton about the Tooting house for wealth tax purposes - is this true and if so, is there a way of reducing my overall tax liability? Again, I would be interested to hear from people who are in a similar sort of situation (i.e. a large capital asset that does not in itself generate any meaningful cash) and how they deal with this.

4. As far as my GE package is concerned, am I likely to have to fill in a tax return (I read somewhere that if you earn over a certain amount you have to do this)? If so, would I have to account for the bonus on a monthly basis before submitting the return, even though the actual amount of the bonus is dependent on performance etc.?

5. If I opt for a company car rather than a car allowance, on what basis is the taxable benefit calculated?

6. I am still very confused about the G permit business and how it affects your tax position. If you earn your income in GE, does the GE canton and confederation claim its share of the income or do I have to pay tax in France?


Apologies for the large post. I know I would be wise to seek the services of an accountant on this (I will eventually), but any views or thoughts would be much appreciated.

Best,
Alex
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Old 16.08.2007, 10:48
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Re: Thoughts on property/tax situation

Apologies for the apparent contradiction. I am assuming that there will be taxable income, but it may small enough to be swallowed up by our PAs. Best, Alex
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Old 16.08.2007, 11:35
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Re: Thoughts on property/tax situation

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Hello all,

These are exciting times. I have quit my City lawyer job and accepted a post at a major tech company in Geneva and will be relocating there in May-July next year (I will be operating from their HQ in London until then). I will be going there as a Swiss tax payer, not as a UK expat.

My wife and I have been discussing what to do about our house in Tooting during our time in GE. Three estate agents have valued it at about 700k and it's potential rentla income is about 2300 a month. The mortgage on it is currently about 2250 a month and the bank have said that we can keep it without going buy to let for anoth 2 or so years. With costs and estate agents' fees, it is more than likely that I will be making a loss, so I don't anticipate any tax liability.

My salary in CH will be about 180,000CHF. I will have a car allowance of about 1,100CHF and an annual bonus of up to 40,000CHF. I plan to live in Vaud and work in GE.

I wanted to seek some comfort from you on some questions I have:

1. If I keep the existing repayment mortgage, the only deductions I can make are the mortgage interest element (about 1200 a month), estate agents' fees (about 250) and costs (about 100 a month). Even if I am making a loss each month, I will still pay tax on the difference between 2300 and 1550 (subject to PAs). Is this right? I know circumstances differ for everyone, but I would be interested to hear from people who are in a similar sort of situation and how they deal with this.

2. I read in another thread that I will have to notify the canton about the Tooting house for wealth tax purposes - is this true and if so, is there a way of reducing my overall tax liability? Again, I would be interested to hear from people who are in a similar sort of situation (i.e. a large capital asset that does not in itself generate any meaningful cash) and how they deal with this.

4. As far as my GE package is concerned, am I likely to have to fill in a tax return (I read somewhere that if you earn over a certain amount you have to do this)? If so, would I have to account for the bonus on a monthly basis before submitting the return, even though the actual amount of the bonus is dependent on performance etc.?

5. If I opt for a company car rather than a car allowance, on what basis is the taxable benefit calculated?

6. I am still very confused about the G permit business and how it affects your tax position. If you earn your income in GE, does the GE canton and confederation claim its share of the income or do I have to pay tax in France?


Apologies for the large post. I know I would be wise to seek the services of an accountant on this (I will eventually), but any views or thoughts would be much appreciated.

Best,
Alex
Be aware that the Swiss are rather accustomed to "dealing" with foreign assets and income simply as an addition to your capital assets and to your overall income. They are not particularly happy with complicated situations where you do not own the asset or where you are paying taxes in another country on income from assets. This would be your case here. For this reason it is better to forget that you own the asset for the purpose of the tax declaration. This advice is based on the situation of not moving to Switzerland permanently but rather enjoying a sojourn away from the stress of London. If on the other hand you are intending to have a permanent move then you need to declare this asset IF there is any intention of bringing any realised funds into Switzerland. If that is the case then your situation regarding this asset and this income source becomes somewhat more complex. Some cantons disregard foreign income from immovable assets (ie houses and land) on the grounds it is taxed in situ. Others do not... For Vaud I am not sure.

Was there a point 3 or did you just miscount? As for point 4.
When you arrive you will be taxed at source. As your Net II income is over 120K you are obliged to fill in a tax form. Based on what you declare you will be either given money back or asked to contribute further. If you are anything close to astute in your choice of place of domicile and fill the tax form out correctly then you will receive a rebate. A bonus is treated as a part of your salary on the month it is paid. As a PAYE this is a real pain - you earn 50K in one month and the authorities generously tax you as earning 600K per year for that month ie from the 40K bonus they will confiscate 20K until such times as you have a decision on your definite tax level - maybe 18 months later...

If you take a company car, you are charged at 0.8% of the purchase price per month as additional income. This means for example if the car costs 60K your income will show for tax purposes an additional CHF 5760 per year. If you choose the allowance this will depend on the agreement the company has with the tax authorities. Usually you are better taking the allowance.

A G permit only comes into play when you live in Europe and work in Switzerland, which will not be your case. If you decide to take a G permit there is a splitting of liability so it is not black and white hence the confusion. Social contributions are mainly made in Switzerland with taxation occuring in France.
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Old 16.08.2007, 11:42
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Re: Thoughts on property/tax situation

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As your Net II income is over 120K you are obliged to fill in a tax form.
By the way, is this voluntary? Or do you receive the usual courier?
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Old 16.08.2007, 11:55
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By the way, is this voluntary? Or do you receive the usual courier?
Okay you win today...
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Old 16.08.2007, 14:11
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Re: Thoughts on property/tax situation

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Be aware that the Swiss are rather accustomed to "dealing" with foreign assets and income simply as an addition to your capital assets and to your overall income. They are not particularly happy with complicated situations where you do not own the asset or where you are paying taxes in another country on income from assets. This would be your case here. For this reason it is better to forget that you own the asset for the purpose of the tax declaration. This advice is based on the situation of not moving to Switzerland permanently but rather enjoying a sojourn away from the stress of London. If on the other hand you are intending to have a permanent move then you need to declare this asset IF there is any intention of bringing any realised funds into Switzerland. If that is the case then your situation regarding this asset and this income source becomes somewhat more complex. Some cantons disregard foreign income from immovable assets (ie houses and land) on the grounds it is taxed in situ. Others do not... For Vaud I am not sure.

Was there a point 3 or did you just miscount? As for point 4.
When you arrive you will be taxed at source. As your Net II income is over 120K you are obliged to fill in a tax form. Based on what you declare you will be either given money back or asked to contribute further. If you are anything close to astute in your choice of place of domicile and fill the tax form out correctly then you will receive a rebate. A bonus is treated as a part of your salary on the month it is paid. As a PAYE this is a real pain - you earn 50K in one month and the authorities generously tax you as earning 600K per year for that month ie from the 40K bonus they will confiscate 20K until such times as you have a decision on your definite tax level - maybe 18 months later...

If you take a company car, you are charged at 0.8% of the purchase price per month as additional income. This means for example if the car costs 60K your income will show for tax purposes an additional CHF 5760 per year. If you choose the allowance this will depend on the agreement the company has with the tax authorities. Usually you are better taking the allowance.

A G permit only comes into play when you live in Europe and work in Switzerland, which will not be your case. If you decide to take a G permit there is a splitting of liability so it is not black and white hence the confusion. Social contributions are mainly made in Switzerland with taxation occuring in France.
Superb, Richard - thanks for the tips. Some thoughts/question of my own in response:

1. Yes, I did miscount.

2. Regarding the bonus computation - I agree that this is a real pain - does it really take that long to work out the definite tax level?

3. Regarding the car allowance - are you implying that the deals that are struck between the authorities and the company are such that they mitigate the "taxable value" of the allowance for income tax purposes?

4. Thanks for the G permit stuff - confusing indeed. The only reason for asking is that with housing stock being what it is in GE/VD, living in France may be an option. Is there anybody out there who has tried this?

Thanks again for your very helpful responses.

Best,
Alex
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Old 16.08.2007, 14:12
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Re: Thoughts on property/tax situation

4. search for "live france" and behold
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Old 16.08.2007, 14:30
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Re: Thoughts on property/tax situation

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4. search for "live france" and behold
Ta very much
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Old 17.08.2007, 09:53
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Re: Thoughts on property/tax situation

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Superb, Richard - thanks for the tips. Some thoughts/question of my own in response:

1. Yes, I did miscount.

2. Regarding the bonus computation - I agree that this is a real pain - does it really take that long to work out the definite tax level?

3. Regarding the car allowance - are you implying that the deals that are struck between the authorities and the company are such that they mitigate the "taxable value" of the allowance for income tax purposes?

4. Thanks for the G permit stuff - confusing indeed. The only reason for asking is that with housing stock being what it is in GE/VD, living in France may be an option. Is there anybody out there who has tried this?

Thanks again for your very helpful responses.

Best,
Alex
To your further questions:
Taxation in Switzerland and in particular the processing of your tax declaration takes varying lengths of time depending on Canton. A good example is the poor soul who moves from ZH to Aargau. For some reason ZH take an eternity to process taxes resulting in tax bills coming from 2 years previously. ie you are carry a 2 year old debt around with you. Move to Aargau and you are taxed up front which is a major shock to the system and the wallet.

It is therefore realistic to assume that if you fill in your tax return in March of 08 for tax year 2007 then you will get a definite decision in mid 2009. One exception to this is if you leave the country. Then they will do it within a couple of months which shows what is capable if they want to do something...

There are two ways to circumvent your tax on bonus issue though. You can request from the commune to be taxed like a Swiss - sorry I don't know the French for this, or alternatively you can buy a house in which case you are no longer taxed at source.

3. Each company that is worth its salt or has more than 10 employees needs to have an expenses regulation. This is approved by the canton. As the company becomes more influential within the canton the nature of this regulation becomes more exotic. Given that they are individual it is not possible to make any definite statement outside of the guidelines that have been federally agreed. Even then the canton can decide otherwise upon application. It is therefore important to decide based on two pieces of information:
a) Where you will be living and whether you can claim the distance travelled as a taxable deduction.
b) How the car is treated within the company regulations which no doubt you will receive for perusal in due course.
Don't forget that both methods ie company car or car allowance should, but must not, appear as a benefit in kind and be taxable...
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Old 17.08.2007, 11:12
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Re: Thoughts on property/tax situation

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To your further questions:
Taxation in Switzerland and in particular the processing of your tax declaration takes varying lengths of time depending on Canton. A good example is the poor soul who moves from ZH to Aargau. For some reason ZH take an eternity to process taxes resulting in tax bills coming from 2 years previously. ie you are carry a 2 year old debt around with you. Move to Aargau and you are taxed up front which is a major shock to the system and the wallet.
Interesting and...not that surprising really. I've heard that the bureaucracy in CH is unique. Probably no worse than France though.

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It is therefore realistic to assume that if you fill in your tax return in March of 08 for tax year 2007 then you will get a definite decision in mid 2009. One exception to this is if you leave the country. Then they will do it within a couple of months which shows what is capable if they want to do something...
OK, at least that something.

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There are two ways to circumvent your tax on bonus issue though. You can request from the commune to be taxed like a Swiss - sorry I don't know the French for this, or alternatively you can buy a house in which case you are no longer taxed at source...
OK, now I understand. In practice, is it fair to say that there is little difference in terms of outcome - merely a cash-flow impact?

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3. Each company that is worth its salt or has more than 10 employees needs to have an expenses regulation. This is approved by the canton. As the company becomes more influential within the canton the nature of this regulation becomes more exotic. Given that they are individual it is not possible to make any definite statement outside of the guidelines that have been federally agreed. Even then the canton can decide otherwise upon application. It is therefore important to decide based on two pieces of information:
a) Where you will be living and whether you can claim the distance travelled as a taxable deduction.
b) How the car is treated within the company regulations which no doubt you will receive for perusal in due course.
Don't forget that both methods ie company car or car allowance should, but must not, appear as a benefit in kind and be taxable...
I see. I'll have to ask them about that - the policy is still at the design phase (they are going to be moving a whole load of staff to GE next year).

Richard, thanks agian for your time and effort on this. It is truly appreciated.

Best,
Alex
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Old 27.08.2007, 22:23
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Was there a point 3 or did you just miscount? As for point 4.
When you arrive you will be taxed at source. As your Net II income is over 120K you are obliged to fill in a tax form. Based on what you declare you will be either given money back or asked to contribute further. If you are anything close to astute in your choice of place of domicile and fill the tax form out correctly then you will receive a rebate. A bonus is treated as a part of your salary on the month it is paid. As a PAYE this is a real pain - you earn 50K in one month and the authorities generously tax you as earning 600K per year for that month ie from the 40K bonus they will confiscate 20K until such times as you have a decision on your definite tax level - maybe 18 months later..
Richard, apologies for digging this up (I know that thread necroing is a little frowned upon). Having thought about this a little, is there not a danger that under this scenario you would end up paying tax twice on the same income (the bonus)? Let me explain: if your taxable income calculation has to include your putative bonus (i.e. 180000+car allowance+bonus), and the canton calculates the tax on your bonus on the month it is paid by extrapolating, you must end up with a double recovery....

I am concerned that being paid a bonus under this regime will end up being less beneficial than asking for a higher basic... Is that right?

Thanks again for your help...
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Old 27.08.2007, 22:49
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Let me explain: if your taxable income calculation has to include your putative bonus (i.e. 180000+car allowance+bonus), and the canton calculates the tax on your bonus on the month it is paid by extrapolating, you must end up with a double recovery....

I am concerned that being paid a bonus under this regime will end up being less beneficial than asking for a higher basic... Is that right?

Thanks again for your help...
Ehhh... not really, since the taxable income calculation is done each month by the employer as you will be taxed at source, and not on an ex ante yearly basis. Effectively they will multiply the monthly by twelve and apply the relevant tariff. So you will only be taxed a bit extra on bonus month.

Or that's what I saw in the past ten years anyhow.
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Old 28.08.2007, 18:08
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Re: Thoughts on property/tax situation

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Richard, apologies for digging this up (I know that thread necroing is a little frowned upon). Having thought about this a little, is there not a danger that under this scenario you would end up paying tax twice on the same income (the bonus)? Let me explain: if your taxable income calculation has to include your putative bonus (i.e. 180000+car allowance+bonus), and the canton calculates the tax on your bonus on the month it is paid by extrapolating, you must end up with a double recovery....

I am concerned that being paid a bonus under this regime will end up being less beneficial than asking for a higher basic... Is that right?

Thanks again for your help...
Yes. But as always Shorrick is right in that what effectively happens is the year is split into 12 individual non extrapolated events when you are paid and your tax is calculated individually. the problem comes when you get your 50K bonus for the year on your salary of 15K. This gives you for that month an effective annual salary of 780K and that puts you in the heavy hit bracket ie instead of (just as an example) a tax rate applied of 14% you will get one of 20% whereas your real tax rate should have been 15% averaged out over the year. So your effective hit is then:
14% of 15K x 11 =23100
20% of 65K x1 = 13000
total tax paid is then 36100

Averaged out the 230000 would be taxed at 15% so
15% of 230K is 34500

Hence effective difference is only 1600 ie lets not shout too loud bearing in mind you will get it back at some point in the future as with salaries over 120K you must fill in a tax return...
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Old 28.08.2007, 20:23
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whereas your real tax rate should have been 15% averaged out over the year.
OK, so are you saying that the bonus (for "tax at source" purposes) is not included as part of your taxable income calculation (i.e. for the purposes of working out in which % tax bracket your income falls into) for 11/12 months?

That would make sense, otherwise = double recovery.
Thanks again for your time and efforts both of you.
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Old 29.08.2007, 08:47
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OK, so are you saying that the bonus (for "tax at source" purposes) is not included as part of your taxable income calculation (i.e. for the purposes of working out in which % tax bracket your income falls into) for 11/12 months?

That would make sense, otherwise = double recovery.
Thanks again for your time and efforts both of you.
That is exactly what Shorrick and I are saying. With "quellensteuer" (PAYE) there is a table for each canton. Your salary is then x and you look up x in the table and are given a tax amount y. The tax deducted is then y. This is done each month independently of any other month. At the end of the year you are then either under or over 120K if over you must fill in a tax form if under then it is an option as long as certain conditions have not otherwise been met - primarily filling one in previously. If you make the step of buying a house then you need to register this at the local town hall anyway who will free you from the PAYE requirement - in fact they must.
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Old 29.08.2007, 08:50
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That is exactly what Shorrick and I are saying. With "quellensteuer" (PAYE) there is a table for each canton. Your salary is then x and you look up x in the table and are given a tax amount y. The tax deducted is then y. This is done each month independently of any other month. At the end of the year you are then either under or over 120K if over you must fill in a tax form if under then it is an option as long as certain conditions have not otherwise been met - primarily filling one in previously. If you make the step of buying a house then you need to register this at the local town hall anyway who will free you from the PAYE requirement - in fact they must.
Richard, your input and Shorrick's input are both extremely valuable here. This is a tough area for someone who is used to a partially progressive system such as the one in the UK. Much appreciated.

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Old 29.08.2007, 16:23
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Re: Thoughts on property/tax situation

A couple more things, taxes are based on where you live in CH. Living in Geneva can be "less than optimal" tax-wise. A lot of people from there live further along the lake where it's more tax-friendly. Without even looking, I expect France would be a non-starter.

You and your wife will have to file jointly/together.

You will be asked to estimate your income on arrival and pay a nominal tax to cover the part year. You may be stung for withholding tax, but I think it's only for the national tax (I pay 14% I think). After the first year, you will be asked to "pay as you go" for all levels of taxation.

Company car is extremely complicated, based on things as minute as an individual ruling between the tax office and the employer. But basically, more business miles = good, low business miles = taxed as income.
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Old 29.08.2007, 16:44
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A couple more things, taxes are based on where you live in CH. Living in Geneva can be "less than optimal" tax-wise. A lot of people from there live further along the lake where it's more tax-friendly. Without even looking, I expect France would be a non-starter.
Ah but since we're talking about tax at source there isn't really much difference between Geneva and Vaud....

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You will be asked to estimate your income on arrival and pay a nominal tax to cover the part year. You may be stung for withholding tax, but I think it's only for the national tax (I pay 14% I think). After the first year, you will be asked to "pay as you go" for all levels of taxation.
Now that I'd be very interested in - it is the first time I hear about the advance tax concept and a segregation between federal and cantonal as far as the PAYE system is concerned.
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Old 29.08.2007, 17:01
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Re: Thoughts on property/tax situation

Well, the details are all a bit complicated, but I have witholding tax deducted by my employer (it may be because of my non-EU passport, although I have an L-EG).

I just checked, it is 14.03%, but as I said, I think this is national only.

We then get a quarterly bill to "pay as you go" during the year based on last years income.

I am employed by ZH based employer and my wife is self-employed...
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Old 29.08.2007, 17:11
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Re: Thoughts on property/tax situation

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Well, the details are all a bit complicated, but I have witholding tax deducted by my employer (it may be because of my non-EU passport, although I have an L-EG).

I just checked, it is 14.03%, but as I said, I think this is national only.

We then get a quarterly bill to "pay as you go" during the year based on last years income.

I am employed by ZH based employer and my wife is self-employed...
Well, um, if you receive a bill based on last year's income (actually any kind of regular tax bill) you are then definitely not taxed at source...

As a sidenote, whatever is being withheld from your salary isn't national - within the Swiss tax at source system all taxes (federal, cantonal, communal and church if applicable) are bulked together.

Frankly, if you on one hand see withholdings on your salary slip and on the other still pay taxes by means of the pink payslips, there's something dodgy going on.
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