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Old 11.07.2012, 06:35
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Part Year Resident - Quellensteuer or Exemption Method?

Hello All,

Great site!

I'm an unmarried Canadian who may be taking a job in Zurich, and I'm investigating the tax situation. One question is how will my part year (first year) taxes be handled.

For simplicity, here is the situation:

1. I move at the end of August.
2. My Canadian earnings were $100k (up till August)
3. My Swiss earnings will be $50k (Sept to Dec)

Under Quellensteuer, my tax is approx 14% of gross salary.
http://www.steueramt.zh.ch/dam/finan..._qst12_def.pdf

My question is whether the 120chf threshold applies to my full year income? (ie $100k from my prior job in Canada, plus $50k in Switzerland)

The standard approach to split year taxation in most OECD countries is the "exemption" method per Article 23a of the OECD Model Convention on Taxation.
http://www.oecd.org/dataoecd/50/49/35363840.pdf

How this would work is that the taxpayer would pay taxes to the new country (where they moved to) based upon the marginal tax rates applied to income in the new country, starting at the level of income earned in the prior country.

Ie. in my example, it would be the income tax owing on $50k, but taxed at the Swiss marginal rates between $100k and $150k.

For me living in Zurich, even allowing for various deductions, this exemption method would result in much higher taxes than the Quellensteuer method.

Could someone here with a 120chf+ salary advise on their tax experience whether relocated midway through the year?

Many thanks!!
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Old 13.07.2012, 17:07
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Re: Part Year Resident - Quellensteuer or Exemption Method?

I followed up with the Swiss authorities, and they advise that the 120k threshold derives from the annualized Swiss income, not from the received Swiss income.

So in the example I gave, even though the received Swiss income is CHF50k, the annualized Swiss income is CHF150k which is over the threshold, and so a tax return would be required.
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Old 13.07.2012, 17:09
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Re: Part Year Resident - Quellensteuer or Exemption Method?

ps. And in the calculation of the tax rates, the exemption method would apply. Ie it would be based upon the Swiss earned income taxed at the marginal rates applicable, in excess of the taxable income earned elsewhere.
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Old 13.07.2012, 17:31
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Re: Part Year Resident - Quellensteuer or Exemption Method?

pps. Also, it seems that if one had foreign income higher than CHF 2500, then one is required to undergo the supplemental tax assessment, regardless of whether one's annualized Swiss income exceeds CHF 120k

I quote from the last PDF at the following site
http://www.steueramt.zh.ch/internet/...eitnehmer.html

Instruction of the Department of Finance
on the supplementary assessment in respect of the collection of withholding taxes (of 23 November 1998)

A. Precondition for supplementary assessment
1. Foreign employees shall be subject to supplementary assessment if, in addition to their income subject to withholding tax, they
have additional income or property not taxed at source.
2
The following items shall be considered as supplementary taxable income:
• Income exceptionally not taxed at source from non-self-employed gainful employment (e.g. from income for non-self-employed gainful employment paid from abroad)
• Income from self-employed gainful employment
• OASI pensions
• Full old-age pensions under the IV (invalidity insurance) due to one hundred percent invalidity
• Full old-age pensions under accident insurances due to one hundred percent invalidity
• Pensions under 2nd pillar and pillar 3 a
• Domestic and foreign income from securities and credit
• Income from real estate
• Alimony the taxpayers receive for themselves or for children under their parental authority
• Income from the granting or using of copyrights or patents
• Income from lotteries or lottery-like undertakings as well as competitions
• Income from usufruct
• Income from foundations
• Capital benefits from pensions and lump sum cash settlements under OASI /IV.

3. A supplementary assessment shall only be applied if the taxable income not subject to withholding taxes is at least CHF 2 500 or if the taxable total assets are a minimum of CHF 200 000.
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Old 17.07.2012, 13:14
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Re: Part Year Resident - Quellensteuer or Exemption Method?

I have moved in the middle of the year (2011) and last month got a Steuererklärung form. I didn't have to fill it, however. This situation doesn't apply to you, most likely, but I was told while your main interests (Lebensmittelpunkt) are abroad you don't need to fill the form. Just write it exactly as it is "My main interests (family) are abroad and I travel there frequently" on the front page and return it. I had asked Zürich Steueramt and they confirmed such a clause does exist and I am free to exercise it. So I did.
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