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Old 26.07.2008, 13:11
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Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

Good Morning!

I've been reading the forums for a few months now and thought it was time i should sign up, introduce myself, and post my first post. I do have an ulterior motive though... I have a specific question that I can't find the answer to in the forums. I have scoured the internet for many hours also, but without success so far. (I am somewhat limited in the fact that i don't speak much German - something i aim to remedy as soon as possible).

Ok, so here is a bit of background. I moved to Basel in June in order to start a new job here at the beginning of July 2008, so I've been here for a little over a month. I'm from the UK originally. Everything has been going well, I'd say i have integrated very well so far (as well as someone can do in 6 weeks!), and i'm generally loving been here in Schweiz! I received my first months salary and pay-slip yesterday. I consider myself a relatively intelligent human being, however, i think even Einstein would have trouble getting his head around the Swiss tax system for foreign workers!

So, my question (a multi-part question) concerns paying taxes as a B permit holder, currently living in Basel-stadt, and, additionally, who will (most likely) move to Aargau (specifically Rheinfelden) in approx. 2 months time.

So, in my first pay slip i can see that i paid "withholding tax" for the money i have earned in the first month (i understand the principle behind "withholding tax" - the tax authority worry that as a foreigner the recipient/payee might "run off" without paying taxes owed to the state/council/etc.). Additionally, i also payed "advance tax" on my proposed next months salary (at least that is what i assume the deduction merely labelled "advance" is referring to in my pay-slip - i assume this is correct, right??? If someone can confirm this, that would be great).

I understand the principle behind "advance tax" too - i.e. that as a foreigner i don't spend all my money such that i can't pay my tax bill when it is due. Makes sense.

I am also aware of the 120k threshold for having to file a tax return.

I am also aware that in some cantons you pay tax in "advance" and in other cantons you pay tax in "arrears" (retrospectively).

Ok, so here are my specific questions;

1) Is the above situation normal? Paying "withholding" AND "advance" tax in my very first months salary?

2) In the future, will I pay only the "advance tax"?

3) What will happen if i move to Aargau? I assume i need to contact the Basel-stadt tax office, and when i do will i receive a rebate on my "advance" or "withholding" tax, (assuming/if people in Aargau pay tax in "arrears")

3a) Does anyone know if B permit holders pay tax in advance or in arrears in Aargau??

To complicate matters even more, I received some additional "bonuses" in my first months salary (such as a reimbursement for expenses accrued in relocation, and also for accommodation). I will also receive a smaller yet similar bonus in month 2 for my temporary accommodation. Therefore my tax burden was higher than "normal" based on my base salary alone. This brings me to my final question(s).

4) Is everything done "pro-rata" here in Schweiz?

4a) Are taxes calculated pro-rata? I will have only worked for 6 months of the tax year (July - December) and I was unemployed (studying) for the first 6 months of the year (back in the UK). So, i'm curious if my tax level will be calculated by the amount earned in the year (approx. half my annual salary) or will i be taxed as if i earned my complete annual salary (pro-rata)?

4b) My company pay salaries using the 13 month system (with the 13th payment late in the year), and, assuming i don't get the sack beforehand, i'll be employed during the month in which the 13th payment is made. Now, is this calculated "pro-rata" in most companies?

(I do realise each company may be different)

Apologies for the really, really long post. Like i said i've already spent a significant amount of time investigating this with little success. In due course i will of course contact the relevant tax offices. However, from reading the posts in this forum i can see there are some very well-informed and enlightened people present here, and i thought they might like to share their wisdom! Many thanks for reading, and more so for any replies i might receive.

Butimi (a nickname, of course!)
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Old 26.07.2008, 13:39
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

Scroll down to the box called "Similar Threads", you'll find some of your answers there.

By the way, welcome to EF
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Old 26.07.2008, 14:07
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons


I would suggest you print this off & make an appointment with your company HR, as they are the ones administeriung your Quellensteur (PAYE).

good luck
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Old 26.07.2008, 15:49
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

I'm a C permit holder but it still may apply to B permits...when I moved from Kanton Zurich in October to Kanton Aargau the tax I had paid Jan-Sept was credited back into my bank account, then I had to pay the new (higher) tax for that period to Kanton Aargau. In summary, if you move Kantons irrespective of the time of year, you pay the new Kanton tax for the whole year. The good news for you is that the tax level in Rhinefelden (Kanton Aargau) is less than Basel Stadt.
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Old 26.07.2008, 15:53
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

Don't forget, you also get taxed on Free Beer
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Old 26.07.2008, 16:03
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

Most of the answers to your questions I have seen on the forum. Check out posts by Richard, who has explained much of this in great detail many times, and search on quellensteuer (there is a thread I started on this which also addresses the 13th month question and more).

Anyway, in some kantons, the time you spent in the UK will not count as income-free months, in other words, the months you were in the UK before coming will be substracted from your deductions. So if you arrived say in July, the deductions are halved. Not all perhaps but most. That is why you will need a tax advisor the first year because you often cannot reduce these deductions yourself in tax software, which means you will get a nasty surprise if you do not realize this.

Forum wisdom is that where you live on December 31st determines your kanton for tax liability for the whole year, and that usually, you will get punished for moving as kantons each try to get their share of the pot (and hold on to it!).
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Old 26.07.2008, 16:20
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

Hello, and thanks for the replies!

Ok, so i'm slowly starting to figure this out, with your help and the forums.

I now have the answers to Qs 1- 3a (inclusive). Both Aargau and Basel-stadt pay tax "in advance". So, i i'll get a rebate for any extra that i've paid once i file a tax return.

I'm still confused with respect to Q4a and Q4b. To simplify the Q4a a little;

Will i be taxed on what i earn (i.e. in the 6 months i will have been here - ca. 50% of my annual salary), or will i be taxed on what i would have earned if in "theory" i had been here a whole year (pro-rata - 100% of my annual salary)???

In the UK people are only taxed on what they ACTUALLY earn in a tax year (i.e. not pro-rata).

At the moment i am paying advance tax pro-rata (working on the basis that i will earn 100% of my salary within the tax year). Therefore, i should receive a healthy tax rebate when i file a tax return, right???

The only reason i'm confused/have doubts is that a work colleague made a comment that makes me think that they do it differently here. Would be good if anyone knew (from experience or otherwise) and could enlighten me!

This brings me to a new Q! Ok, so now i know i will pay tax in advance. In Aargau/Basel people are sent tax-returns in approx. March of the year for which they will pay tax. They have until October to file/pay their tax. Well, can anyone tell me based on my situation (outlined above - here since July 2008) when i will have to file my 1st tax return??? Have i "missed" this year now? Will i just file one next year and "back-date" it until July 2008?

Sorry for asking even more questions! The whole tax thing here is really confusing, and like i said i'm a novice. I do really value everyone's input, so thanks.

Regards,

Butimi
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Old 26.07.2008, 18:28
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

Your average monthly salary is multiplied by 12 to obtain the presumptive annual salary. That determines the tax rate. The tax rate is then multiplied by the actual salary to determine the tax liability.
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Old 26.07.2008, 19:42
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Re: Tax issues - Withholding tax; advance tax; taxed pro-rata; and moving cantons

Thanks Goldtop!

So, as i thought, it is the worse of the 2 possible scenarios - the tax system really is very different here. Thought i might catch a break. Nevermind.

Thanks everyone for the help figuring it out.

Butimi
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