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Old 01.08.2021, 10:26
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Withholding Tax

Hello, I am trying to understand the mechanics of the withholding tax.

My employer will be using global service payroll for tax and social insurance payments, and after reading around the Swiss tax system, I've found out that I will be taxed at source (withholding tax) due to my B-Permit.

So I am using https://ethz.ch/en/the-eth-zurich/wo...alculator.html this calculator to run some tax simulations.

Based on the current factors:

Salary: 100,000 per year (100%)
Canton: Zurich
Married: No
Children: 0
Church: No

The tax breakdown is as follow

Quote:
Total deductions
917.25 CHF
Non-​occupational accident
50.00 CHF
AHV contributions
441.65 CHF
ALV contributions
91.65 CHF
Savings contribution pension fund (Standard plan)
299.60 CHF
Risk premium pension fund (Standard plan)
34.35 CHF
If I then apply the withholding tax

Quote:
Total deductions
1739.70 CHF
Non-​occupational accident
50.00 CHF
AHV contributions
441.65 CHF
ALV contributions
91.65 CHF
Savings contribution pension fund (Standard plan)
299.60 CHF
Risk premium pension fund (Standard plan)
34.35 CHF
Withholding tax
822.45 CHF
What I am confused is that, based on the 2021 legislation, if your income exceeds 120,000 per year, you will not be subject to Withholding tax.

That to me seems like an incredible tax benefit, and I am wondering what am I missing from this picture.

- Do I pay less taxes if I earn more than 120k per year?
- If I earn less than 120k per year, can I claim a different tax rate if I am living in a low tax municipality? (i.e. Thalwil is much cheaper than Winterthur)
- Are there different tax applied in replacement of the withholding tax for the income greater than 120k per year?
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Old 01.08.2021, 10:37
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Re: Withholding Tax

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Hello, I am trying to understand the mechanics of the withholding tax.

My employer will be using global service payroll for tax and social insurance payments, and after reading around the Swiss tax system, I've found out that I will be taxed at source (withholding tax) due to my B-Permit.

So I am using https://ethz.ch/en/the-eth-zurich/wo...alculator.html this calculator to run some tax simulations.

Based on the current factors:

Salary: 100,000 per year (100%)
Canton: Zurich
Married: No
Children: 0
Church: No

The tax breakdown is as follow



If I then apply the withholding tax



What I am confused is that, based on the 2021 legislation, if your income exceeds 120,000 per year, you will not be subject to Withholding tax.

That to me seems like an incredible tax benefit, and I am wondering what am I missing from this picture.

- Do I pay less taxes if I earn more than 120k per year?
- If I earn less than 120k per year, can I claim a different tax rate if I am living in a low tax municipality? (i.e. Thalwil is much cheaper than Winterthur)
- Are there different tax applied in replacement of the withholding tax for the income greater than 120k per year?
You will have to pay normal tax which might be higher than if withholding tax was deducted. This depends on you actual expenses v assumed deductions & the village you live in.
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Old 01.08.2021, 10:40
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Re: Withholding Tax

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You will have to pay normal tax which might be higher than if withholding tax was deducted. This depends on you actual expenses v assumed deductions & the village you live in.
So technically, earning less than 120k could be initially more beneficial for me because I can choose both cheap and expensive municipalities without any tax difference?
I don't think I have many deductions as I am not married, will work remotely so no commuting, no children, etc.

So basically having larger access to housing market (don't have to worry about calculation tax vs rent, but only consider rent price for my evaluation)
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Old 01.08.2021, 10:50
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Re: Withholding Tax

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So technically, earning less than 120k could be initially more beneficial for me because I can choose both cheap and expensive municipalities without any tax difference?
I don't think I have many deductions as I am not married, will work remotely so no commuting, no children, etc.

So basically having larger access to housing market (don't have to worry about calculation tax vs rent, but only consider rent price for my evaluation)
Yes.

Without commuting costs, lunch at work deduction without a subsidised canteen. Probably around 6k of assumed deduction deductions you would get with withholding tax
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Old 01.08.2021, 11:10
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Re: Withholding Tax

Taxpayers who are not Swiss citizens or C permitholders remain subject to Quellensteuer in 2021.

Quellensteuer for 2021:
New for 2021: Taxpayers who earn less than Fr. 120'000 per year and are subject to Quellensteuer may elect to file a tax return in 2021.
- This effectively changes the Quellensteuer from a source-tax to a withholding tax.
- The election remains in effect going forward.

For taxpayers earning more Fr. 120'000 per year, Quellensteuer remains a withholding tax rather than a source-tax.
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Old 01.08.2021, 17:55
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Re: Withholding Tax

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Yes.

Without commuting costs, lunch at work deduction without a subsidised canteen. Probably around 6k of assumed deduction deductions you would get with withholding tax
So when I start earning more than 120k I can/should keep track of all my expenditure and receipts and claims tax refund almost as I were self-employed?

And just to confirm, if I earn less than 120k, can I still claim tax refunds?
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Old 01.08.2021, 18:50
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Re: Withholding Tax

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So when I start earning more than 120k I can/should keep track of all my expenditure and receipts and claims tax refund almost as I were self-employed?

And just to confirm, if I earn less than 120k, can I still claim tax refunds?
No, you charge KM's or Train fare plus a daily allowance for eating. No need for any receipts.

You don't do anything, you have assumed adductions, if you compare tax based on actual salary v tax at source you are taxed about 15k lower than earnings on 100k
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Old 01.08.2021, 21:06
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Re: Withholding Tax

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And just to confirm, if I earn less than 120k, can I still claim tax refunds?
If you are subject to Quellensteuer you can deduct a reduced set of expenses, like voluntary contributions to pension funds (but not all of them) or educational costs (with some conditions).

Here the relevant page:
https://www.zh.ch/de/steuern-finanze...lensteuer.html
at section 03 you'll find the actual deduction form for Quellensteuer. It's only in German, but you have time to get to know each other :-D
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Old 02.08.2021, 09:30
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Re: Withholding Tax

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No, you charge KM's or Train fare plus a daily allowance for eating. No need for any receipts.

You don't do anything, you have assumed adductions, if you compare tax based on actual salary v tax at source you are taxed about 15k lower than earnings on 100k
Thank you!

So if I understand this correctly, because the withholding tax deducts assumed costs, I will be better off in terms of tax advantage working remotely (no commute/food) with withholding tax, than 120k with some real costs.
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Old 02.08.2021, 09:59
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Re: Withholding Tax

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Thank you!

So if I understand this correctly, because the withholding tax deducts assumed costs, I will be better off in terms of tax advantage working remotely (no commute/food) with withholding tax, than 120k with some real costs.
In most cased I would think so, unless you were in a very very low tax village.
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Old 02.08.2021, 13:10
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Re: Withholding Tax

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Thank you!

So if I understand this correctly, because the withholding tax deducts assumed costs, I will be better off in terms of tax advantage working remotely (no commute/food) with withholding tax, than 120k with some real costs.
Note that for remote working due to COVID specifically, last year for example ZH canton authorised the deductions of commute and food costs as if you were going to the office, even if you weren't.

I think the bottom line is - you can estimate how much taxes you would own if will file a tax declaration, compare it with what you paid - and decide if you want to go down that route or not. Keep in mind as mentioned that once you voluntarily file - you will have to do it all the years
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Old 02.08.2021, 13:17
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Re: Withholding Tax

Here I go again on this:

Withholding tax is what is deducted from dividends and other payments at the rate of 33% and can be reclaimed (in part) by completing at tax declaration.

Quellensteuer is literally ‚tax at source’ or PAYE (pay as you earn in the UK) is what we are talking about here. You cannot reclaim it…
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Old 02.08.2021, 13:35
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Re: Withholding Tax

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Here I go again on this:

Withholding tax is what is deducted from dividends and other payments at the rate of 33% and can be reclaimed (in part) by completing at tax declaration.

Quellensteuer is literally ‚tax at source’ or PAYE (pay as you earn in the UK) is what we are talking about here. You cannot reclaim it…
Sorry, but you are incorrect. It is a form of withholding tax that can be reclaimed if you have paid too much when you submit a full tax return (used to be only if you earned over 120k, seems like it is now opt-in if you earn under - I stopped caring when I got a c permit). I know this for a fact as I was able to reclaim for pretty much every year I lived in canton Zurich.
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Old 02.08.2021, 13:59
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Re: Withholding Tax

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Sorry, but you are incorrect. It is a form of withholding tax that can be reclaimed if you have paid too much when you submit a full tax return (used to be only if you earned over 120k, seems like it is now opt-in if you earn under - I stopped caring when I got a c permit). I know this for a fact as I was able to reclaim for pretty much every year I lived in canton Zurich.
The usual idea of "Tax at Source" (Quellensteuer) is that you don't complete a tax form...
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Old 02.08.2021, 14:09
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Re: Withholding Tax

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The usual idea of "Tax at Source" (Quellensteuer) is that you don't complete a tax form...
I also think you are not correct here - I have to complete the tax declaration every year and I pay the same "Quellensteuer" - at the end I just do the math on whether I need to get a refund or pay some more.

Quellensteuer does not mean it is final - it is an anticipation of the tax. On top of that, under certain conditions (<120k + others) you have the right to accept that as a final tax.
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Old 02.08.2021, 15:55
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Re: Withholding Tax

The below is from the textbook "Das schweizerische Steuerssytem" (translated):

"Ch. 6 Source Tax

Retrospective ordinary assessment: In principle, once the source tax has been levied, the direct federal tax on the income from employment is definitively assessed. However, if the gross income exceeds CHF 120'000, a retrospective ordinary assessment must be made in accordance with DBG 90 para. II. The tax deducted at source is credited. In this case, the source tax thus becomes a pure withholding tax."
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Old 02.08.2021, 20:01
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Re: Withholding Tax

So payments on account, when you've had a drop in income, are also withholding taxes?

Why does it matter? If you pay too much, you get it back. If you pay too little, you pay it. It all evens out in the end.

I've just had a massive fall in my income to "ludicrously well paid". I'm expecting a nice rebate.
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Old 03.08.2021, 09:03
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Re: Withholding Tax

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Sorry, but you are incorrect. It is a form of withholding tax that can be reclaimed if you have paid too much when you submit a full tax return (used to be only if you earned over 120k, seems like it is now opt-in if you earn under - I stopped caring when I got a c permit). I know this for a fact as I was able to reclaim for pretty much every year I lived in canton Zurich.
Thank you!

I think I understand now.

Quote:
I have to complete the tax declaration every year and I pay the same "Quellensteuer" - at the end I just do the math on whether I need to get a refund or pay some more.
Do you have any resources on how to calculate taxes to understand whether filing a declaration could make sense for my 100k income?
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Old 03.08.2021, 09:31
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Re: Withholding Tax

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Do you have any resources on how to calculate taxes to understand whether filing a declaration could make sense for my 100k income?
I think you can take your gross net salary as per your end of the year salary certificate, deduct some things that you would deduct in your tax declaration (commute, food, 3rd pillar, health, etc.) and estimate your taxable income (and wealth, but that won't matter much unless you are a millionaire). Then use for example ZH tax calculator and see what ballpark taxes are you talking about.

If you have stocks, you will have to throw those into the mix (both the income to calculate the tax and the already withheld tax to count as credit).

If you want to get a better grasp at how roughly taxes are filed and calculated I'd suggest read some guide. IMO a good english one is this
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Old 03.08.2021, 09:34
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Re: Withholding Tax

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Do you have any resources on how to calculate taxes to understand whether filing a declaration could make sense for my 100k income?
But in general, for a 100k income, <2.5k foreign income and having <200k in wealth (requirements to be allowed not to file the tax return) the difference probably won't be that much, which is exactly the reason the goverment allows you not to file a tax return.

But whether it is worth it or not - up to you!
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