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Old 02.05.2006, 17:08
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[Q&A] Quellensteuer (tax at source for expats)

I have a question on the Quellensteuer:

1) How can one with a B permit and earning less than 120k check if it is worthwile doing a tax return? I checked the online calculator of the national web site but the results are strange. When you add up the kanton and bundes tax for my Kanton and Gemeinde, the numbers are much higher than the total listed at the bottom. This also happens for other kantons (try Zug).

Also, my tax is complicated as I pay employer contributions as well, so would I even be able to pre-calculate whether it is worth submitting a tax form? (I work for the EU, which means my Swiss employer is lucky as I pay everything).

2) Has anyone here had to pay more after you tried to claim tax back in the B permit, less than 120k situation?

3) My gross salary is 76000 (I am researcher) but my pension is only calculated on the basis of 48000. Is this normal? (It says my salary is only insured at a fraction of my net salary). Should I worry about this?

4) If a person has to pay quellensteuer, is it still useful to create a 3a pillar? I.e., is it worth opening a Fisca account? I guess people with a C permit can deduct their 3a payments, but how does this work with quellensteuer? Can one indicate how much you put in and then get a reduction the next year of your quellensteuer??

5) I live in Bern and pay about 31% to taxes and insurances. Would you say this is average, better or worse than normal?

6) Is it common for the 13th month to be taxed as much as the other 12months? My statement treats it equally (taxes are deduced based on 13 months of equal income). IS this normal?

Last edited by muze7; 02.05.2006 at 23:47.
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Old 02.05.2006, 18:41
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Re: questions on quellensteuer (tax at source for expats)

I can only help you with the last 3 questions, as I have never had to pay Quellensteurer.

4) No this is not usual. I just checked a few of my salary receipts. I had a 13th salary (paid 50% june, 50% december), plus a monthly performance bonus. Each month all INCOME was added together, and then AHV, ALV and PK deducted on this amount.
I believe their is an employer contribution to your private pension fund. I would say if they are deductiong PK at 48000, they are doing so to reduce their contribution. I doubt it is legal.

5) Tax alone can be up to around 25% of gross income, with Health insurance 31% is not unusual.

6) Quellensteuer is deducted per month on that monthly income, as if you were paid this amount every month. Therefore, if you are paid your 13th everymonth pro rata, you probably pay a little less tax than someone who gets it lump sum at the end of the year. A 13th is equally taxable as the other 12 months.
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Old 02.05.2006, 23:44
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Re: questions on quellensteuer (tax at source for expats)

Quote:
4) I believe their is an employer contribution to your private pension fund. I would say if they are deductiong PK at 48000, they are doing so to reduce their contribution. I doubt it is legal.
Ok, well since I am paying their contribution, this is an interesting situation. It is good to know I should be insured for the brutto salary, not the 48K, so I will ask what is going on. (The reason I am paying all the employers contributions is complex, but has to do with me being paid by the EU through the University).

Quote:
5) Tax alone can be up to around 25% of gross income, with Health insurance 31% is not unusual.
Hmm, if by health insurance you mean Krankenkasse/Maladie insurance then I am not in a good situation, as the 31% does not include any health insurance, only pension, tax, unfall etc.

6) Aha, thanks, I am glad I now know how that works!
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Old 03.05.2006, 09:47
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Re: questions on quellensteuer (tax at source for expats)

Quote:
Hmm, if by health insurance you mean Krankenkasse/Maladie insurance then I am not in a good situation, as the 31% does not include any health insurance, only pension, tax, unfall etc.
You hit on something which many people don't realise. People seem to be under the illusion that this is a low tax country - it is not. It is a medium level tax country.

You've sat down and done the maths and figured out that your total tax bill is actually quite high. Now people often think about tax in terms of their gemeinde and kanton tax, but forget that there is also federal tax, then there is AHV / IV etc, and let's not forget the cost of basic health insurance is also in reality like a tax because you have to pay it.

I did the exercise a few years ago and came up with a flat rate of 30-35%, and I live in a very low tax Gemeinde (in ZH).

Of course, when you hear about low taxes, the comparison is usually made to a high tax country like Germany, Denmark, Sweden, etc.

Look on the bright side - at least you aren't married to someone who isn't working - then you'd be seriously stitched up!
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Old 03.05.2006, 13:44
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Re: questions on quellensteuer (tax at source for expats)

Here are the answers to your questions.

1) How can one with a B permit and earning less than 120k check if it is worthwile doing a tax return? I checked the online calculator of the national web site but the results are strange. When you add up the kanton and bundes tax for my Kanton and Gemeinde, the numbers are much higher than the total listed at the bottom. This also happens for other kantons (try Zug).

The first thing you need to be aware of is exactly what your taxable income is. Then you can use tables provided by your kantonal steueramt to do the calculations. Try the website they are usually pretty good.
The calculators that you find online will only every give a good estimate and are really for comparison purposes. There is so much that they do not ask that their use is limited. Calculating your taxable income is straightforward for Quellensteuer - you take the monthly income plus the PK contributions multiply by 12 add any bonus and there you have it. When you are thinking of doing a tax return ie a formal one then go into the local Gemeinde and ask for the tax return forms. Alternatively Bern might have software that will do it for you - check. Then you need to carefully fill in the amounts in the respective boxes and check then your taxable income at the end. Note if it is here more then it is not worth doing.

Also, my tax is complicated as I pay employer contributions as well, so would I even be able to pre-calculate whether it is worth submitting a tax form? (I work for the EU, which means my Swiss employer is lucky as I pay everything).

Yes this is a typical contractor situation and it is very possible as the employer contributions do not vary, well they almost don't...

2) Has anyone here had to pay more after you tried to claim tax back in the B permit, less than 120k situation?

The question is really is it possible and the answer is very definitely yes!

3) My gross salary is 76000 (I am researcher) but my pension is only calculated on the basis of 48000. Is this normal? (It says my salary is only insured at a fraction of my net salary). Should I worry about this?

If you are paying quellensteuer and based on a gross salary of 76K no not really. The actual contribution amounts for the pension fund are not fixed by law. There is a minimum and a maximum but other than that they are free to vary. The primary consideration is that the pension fund is taxable with only 7% but if you are paying quellensteuer this is anyway irrelevant.

4) If a person has to pay quellensteuer, is it still useful to create a 3a pillar? I.e., is it worth opening a Fisca account? I guess people with a C permit can deduct their 3a payments, but how does this work with quellensteuer? Can one indicate how much you put in and then get a reduction the next year of your quellensteuer??

No and No are the answers here. Please be aware that it is not simply C permits and the rest. Anyone can complete a tax return and be taxed normally in which case this would come into play.

5) I live in Bern and pay about 31% to taxes and insurances. Would you say this is average, better or worse than normal?
Based on your salary I would say you are paying far too much in the way of insurance. Your taxable portion should not exceed 23%. IF it does then there is something wrong.

6) Is it common for the 13th month to be taxed as much as the other 12months? My statement treats it equally (taxes are deduced based on 13 months of equal income). IS this normal?[/quote]

This is permissable but not normal. It is useful for quellensteuer payers but you might find yourself receiving a bill if you leave shortly after receiving the 13 month unless it is paid in arreers.

Any questions post away
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Old 03.05.2006, 15:10
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Re: questions on quellensteuer (tax at source for expats)

Ok, that is heaps and heaps of info. After reading it, I am not sure that my 31% is correct.

What my contract says (which I still have to sign) is this:

1-
Starting salary (all rounded off):
86000

2- magically reduced to 76000, no idea why

3- this 76000 is then multiplied by all the different % of insurances
(5.05% AVG, 1% ALV, 0.51 Unfall, 10.4% Bernische Pensionkasse, and then 1.2% Verwaltung on 1 months part of 76000),

Together these are the employer contributions I have to pay. Then I presume this 76000 becomes my taxable income?

4- Because then they take out this. based on the 76000
5.05% AVG, 1% ALV, 0.38% unfall and 8.4% Bernische PK

These are my employee contributions I guess.

Then they take out 9.9 % quellensteuer on the 76000.

So I have no idea whether I phrased it correctly, as the actual quellensteuer is only 9.9 %, but in total the contributions, including quellensteuer, amount to 31% if you add it all up (excluding health).

And they pay the net result income out in 13 months equal shares.

But I am confused about what you said about receiving a bill. If the tax as maybe in my case has already been taken out on the 13th month, why would I receive a bill if I leave? are you saying most people get the 13th month parts in June and December ahead of time? So it has nothing to do with how the tax on the 13th month is calculated, is that right?

Also, if you would still think this all adds up to too much, it would seem it is due to the fact I pay employer contributions right? Or would it seem something else has gone wrong as well?

Either way, I know there may be nothing I can do about it. I do not mind paying tax either, but I am disappointed that I have to pay all these pension contributions (employer+employee) because I do not think I can ever take a pension home. (I will be here until after 2007 and being an EU citizen then would mean the Swiss maintain the right of keeping all my contributions; and since I move country every few years, I have this huge AVG and PK hole opening up chasms behind me).

If I go down the route of claiming tax back, I heard you then have to do it every year, even if you have a B and <120k. Is this true?

Anyhow, I really appreciate all the help from you guys.
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Old 03.05.2006, 22:21
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Re: questions on quellensteuer (tax at source for expats)

Quote:
Ok, that is heaps and heaps of info. After reading it, I am not sure that my 31% is correct.

What my contract says (which I still have to sign) is this:

1-
Starting salary (all rounded off):
86000

2- magically reduced to 76000, no idea why

3- this 76000 is then multiplied by all the different % of insurances
(5.05% AVG, 1% ALV, 0.51 Unfall, 10.4% Bernische Pensionkasse, and then 1.2% Verwaltung on 1 months part of 76000),

Together these are the employer contributions I have to pay. Then I presume this 76000 becomes my taxable income?

4- Because then they take out this. based on the 76000
5.05% AVG, 1% ALV, 0.38% unfall and 8.4% Bernische PK

These are my employee contributions I guess.

Then they take out 9.9 % quellensteuer on the 76000.

So I have no idea whether I phrased it correctly, as the actual quellensteuer is only 9.9 %, but in total the contributions, including quellensteuer, amount to 31% if you add it all up (excluding health).

And they pay the net result income out in 13 months equal shares.

But I am confused about what you said about receiving a bill. If the tax as maybe in my case has already been taken out on the 13th month, why would I receive a bill if I leave? are you saying most people get the 13th month parts in June and December ahead of time? So it has nothing to do with how the tax on the 13th month is calculated, is that right?

Also, if you would still think this all adds up to too much, it would seem it is due to the fact I pay employer contributions right? Or would it seem something else has gone wrong as well?

Either way, I know there may be nothing I can do about it. I do not mind paying tax either, but I am disappointed that I have to pay all these pension contributions (employer+employee) because I do not think I can ever take a pension home. (I will be here until after 2007 and being an EU citizen then would mean the Swiss maintain the right of keeping all my contributions; and since I move country every few years, I have this huge AVG and PK hole opening up chasms behind me).

If I go down the route of claiming tax back, I heard you then have to do it every year, even if you have a B and <120k. Is this true?

Anyhow, I really appreciate all the help from you guys.
So lets have a look at what you are saying...

Firstly I guess that the difference between the 86000 and 76000 is a clever little trick they sometimes pull so that you have paid holidays! If you do not take the holidays you get the money. Check this out.

Looking at what you are saying you are paying 5.05 AHV employer and 5.05 AHV employee - so you are self employed. No problem with this.

The 76000 will then not be your taxable income but instead 63000. The employer contributions are not subject to tax and must be net deducted.

With respect to the 13 month dealing. If you are paid a lump sum every 6 months this must have a starting point. Often companies will say okay you are "penalised" by not getting the full first 13th month part but we will pay you the full 13th month for the second one as you will have then been with us for the full 6 months. Point being if you leave immediately after that payment your averaged salary is higher than your annual would be hence the tendency to pay the second 13th month in November of December to remove this possibility. Furthermore some companies say bollocks this is too much effort we will pay the 13th month irrespective of when you join. Then you get more pay in the first year as this is not pro rated. This means paying more tax...

As for the pensions contributions this is not a problem you can have it paid out or transferred the money is not lost. That is true for the AHV and for the PK. If you transfer it I think it is tax free and if it is paid out it is taxed at 7%. Note here that after 2007 or whenever it is that they change the pension transfer law you can only have it paid out if you leave the EU.

Once you start trying to claim back tax you are burdened with it for the duration of your time in CH. Note here that I would, in your case, not suggest it as the win will probably be minimal and the effort not insignificant. The only reason to do it would be if you organize yourself a flat somewhere inconvenient where it is much quicker to drive than take the train, bus, tram and preferably 30Km each way. With this and the other things you can deduct I think you can probably get down to almost no tax at all...

That said on your salary I guess they are helping with accomodation...
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Old 15.05.2006, 11:58
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Re: questions on quellensteuer (tax at source for expats)

Richard, thanks for all the in depth answers. I am looking into it further.

By the way, they do not help with accommodation. No financial help. If you mean that some companies/universities actually supplement your income to help pay for rent, could you reply?

Although I guess it is too late now, I should have negotiated it before I came right?
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Old 16.05.2006, 21:06
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Re: questions on quellensteuer (tax at source for expats)

Quote:
By the way, they do not help with accommodation. No financial help. If you mean that some companies/universities actually supplement your income to help pay for rent, could you reply?

Although I guess it is too late now, I should have negotiated it before I came right?
I Actually meant that practically all universities have accomodation they own or long term rent and often they let researchers or post docs generally use this. May not be the case for you though... And yes you should have negotiated a few things before you came.

Richard
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Old 17.05.2006, 17:47
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Re: questions on quellensteuer (tax at source for expats)

Ok, no worries. (They only have room for students, I checked).

Yes, I guess I assumed that universities never have any negotiation room upwards, and that I therefore had nothing to negotiate about, but I guess there is always room to negotiate downwards . But there is always a steep learning curve when emigrating/immigrating, you can never be 100% prepared unfortunately, even when you done it several times, in different countries.

I am grateful for the existence of forums .
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Old 22.05.2006, 12:48
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Re: questions on quellensteuer (tax at source for expats)

Hi!

You can download the tax program from: http://www.steueramt.zh.ch/html/home/index.htm

and place the numbers and see it it is worthwhile for you to present the forms. One thing though: they may not accept you sending the forms if you do not earn more than 120K CHF per year (this site is for Zuerich taxes only). In case you live in another Kanton make a google search and you will find the page.

The third pillar is worth the pay. It is a well invested money and you have some money back from it even if you do not present your tax forms. You just need to call the Steueramt Zuerich or wherever Kantonal amt from where you live and ask for the info on how to send the statement of your payment of the 3rd pillar and it s guaranteed you will have some money back.

Hope it helps.

Regards,
Raquel
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Old 22.05.2006, 13:19
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Re: questions on quellensteuer (tax at source for expats)

Thanks, that helps too

I think I will open a 3a account and make a deposit. I do not want to send in the full tax forms, as I have read they can claim more after doing the calculations rather than give you a refund.

I would however like to do as you say, just sent in proof of payment into a 3a pillar. I am worried though about the following. Apparently, we need to send in a copy of the annual salary statement? I get one allowance tax free, which would be listed on this statement, right? now would this be a problem? That they change their mind about the allowance being tax free? Again, I would not fill in a proper tax return form, just send in the proof of 3a payments and the salary form...
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Old 22.05.2006, 14:03
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Re: questions on quellensteuer (tax at source for expats)

Not sure about the payment slip to be send with the 3rd Pillar proof of payment. But if you earn lesss than the 120K CHF, they won't bug you. Call them, they have always been nice to me. They will assign you a person who will always follow any questions regarding your taxes.

Hope it helps.

Cheerio,
Raquel
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Old 20.06.2006, 15:05
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Re: questions on quellensteuer (tax at source for expats)

I was interested in the reply about saving tax as it does seem quite high here. I only have a L work permit and was wondering if I would be eliible to claim a tax refund if I payed into a pillar 3 ?
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Old 20.06.2006, 15:58
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Re: questions on quellensteuer (tax at source for expats)

As I understand it is a withholding tax, rather than a savings tax. This means that when you do your tax return you inform them that you paid a certain amount of withholding tax and they will deduct it from the tax you have to pay (but they will of course count the interest you received as income).

Since the interest rate on CHF is almost nothing this won't be an issue for most people, unless we are talking about a very large quantity of CHF to start with, or you are holding a currency which earns more interest in a Swiss account.
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Old 20.06.2006, 17:02
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Re: questions on quellensteuer (tax at source for expats)

yes but he pays quellensteuer. If you earn less than 120k and pay quellensteuer, you are not allowed to fill in a tax return...?! I was told that if you want to fill one in, you have to apply to the kanton, not the gemeinde to ask to be reconsidered, in other words, that you argue you should be taxed like the swiss and I am not sure if that is a safe thing to do. From then on you would be allowed to fill in a tax return.

I was told by a guy who works on tax refunds that to reclaim the 3a tax, you need a special form, which you send in with a copy of your deposits and a salary statement...
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Old 20.06.2006, 17:07
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Re: questions on quellensteuer (tax at source for expats)

Quote:
yes but he pays quellensteuer. If you earn less than 120k and pay quellensteuer, you are not allowed to fill in a tax return...?! I was told that if you want to fill one in, you have to apply to the kanton, not the gemeinde to ask to be reconsidered, in other words, that you argue you should be taxed like the swiss and I am not sure if that is a safe thing to do.

I was told by a guy who works on tax refunds that to reclaim the 3a tax, you need a special form, which you send in with a copy of your deposits and a salary statement...
We already discussed the issue about whether you can fill in a tax return if you earn less than 120k on another thread (in great detail) so I don't want to go into it here. But the short answer is that you can do it if you want to (you have to work out if it would save you money). This has nothing to do with being taxed like the Swiss. For more details use the search function...
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Old 20.06.2006, 17:16
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Re: questions on quellensteuer (tax at source for expats)

Quote:
We already discussed the issue about whether you can fill in a tax return if you earn less than 120k on another thread (in great detail) so I don't want to go into it here. But the short answer is that you can do it if you want to (you have to work out if it would save you money). This has nothing to do with being taxed like the Swiss. For more details use the search function...
Actually I was wrong - yes we have discussed that issue - but the thread I was referring to was this one. Richard covered these details in his posts. Scroll up for the relevant information.
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Old 21.06.2006, 07:40
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Re: questions on quellensteuer (tax at source for expats)

Quote:
As I understand it is a withholding tax, rather than a savings tax. This means that when you do your tax return you inform them that you paid a certain amount of withholding tax and they will deduct it from the tax you have to pay (but they will of course count the interest you received as income).

Since the interest rate on CHF is almost nothing this won't be an issue for most people, unless we are talking about a very large quantity of CHF to start with, or you are holding a currency which earns more interest in a Swiss account.
To the best of my knowledge the interest for the 3rd pillar is free from any form of tax and is not counted as a capital asset until you "cash it in". At this point it falls under a special tax regime which applies to all savings for old age ie similar in art to pensions.
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Old 12.03.2007, 16:28
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Re: questions on quellensteuer (tax at source for expats)

Hi all

It's a beautifully sunny day in Zürich but I need to sort my taxes out this week so if anyone can help with my question, much appreciated:-

I have been advised that if I pay Quellensteuer (stated on my wageslip) then even if I do earn over 120K, it is up to me whether I want to fill in a tax form or not. Is this correct?

Thank you very much in advance!

SGW
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