What is withholding tax
Withholding tax (Quellensteuer / impôt à la source) is a direct tax collection system where income tax on employment income is deducted by the employer at the time of salary payment and remitted directly to the cantonal tax authority.
This system primarily applies to foreign workers without a settlement permit (C permit). Unlike the ordinary procedure — where the taxpayer independently files a tax return — withholding tax is deducted monthly at the 'source' of the income, i.e. from the gross salary.
Withholding tax already includes the direct federal tax, the cantonal tax and the municipal tax. Its amount depends on the gross income, the canton of employment, the marital status and the number of dependent children.
Who is subject to withholding tax
The following are subject to withholding tax:
- Foreign workers with a B permit (residence) living in Switzerland
- Workers with an L permit (short-term residence), regardless of the length of stay
- Cross-border commuters (G permit) who return daily or weekly to their country of domicile
- Asylum seekers (N permit) and provisionally admitted persons (F permit) who are gainfully employed
- Non-resident artists, athletes, speakers and board members who receive compensation from Swiss sources
C permit holders (settlement) are taxed through the ordinary procedure via a tax return and are not subject to withholding tax. The change from B to C automatically triggers a switch to ordinary taxation from the following year.
How it is calculated
Withholding tax is calculated monthly based on the gross income and the assigned barème. Here are the determining factors:
Calculation basis
The monthly gross income includes the base salary, allowances, bonuses, gratuities and the value of any benefits in kind (company car, accommodation). The 13th month salary and commissions are also included, allocated pro rata.
Progressive rates
The rate is progressive: it increases with income. Each canton publishes its own annual tables (barèmes) with applicable rates for each income bracket. The rate includes federal, cantonal and municipal tax.
Flat-rate deductions included
Unlike ordinary taxation, deductions are already included as flat rates in the barème: professional expenses, insurance premiums (KVG), pillar 3a contributions and the deduction for dual-income couples. No supporting documents need to be submitted.
Withholding tax is calculated separately month by month. A large bonus in one month can lead to a higher marginal rate for that specific month. At year-end, the employer makes an adjustment based on the actual annual income.
Applicable barèmes
The barème (or tariff) determines the applied rate. The choice depends on the worker's personal and family situation. Here are the main codes used in most cantons:
| Code | Personal situation |
|---|---|
| A | Single person without children (unmarried, divorced, widowed, separated) |
| B | Married person with single income (spouse does not work) |
| C | Married person with dual income (both spouses work) |
| H | Single-parent family (with at least one dependent child) |
| D | Secondary income (secondary employment or replacement income) |
| E/F | Special international regulations (quasi-resident, bilateral agreements) |
Each dependent child reduces the applicable rate. The number of children is indicated next to the barème code (e.g. C1 = couple with dual income and 1 child). Children in education up to 25 are generally considered dependents.
Correction: Subsequent Ordinary Assessment (TOU)
The TOU (Taxation Ordinaire Ultérieure / Nachträgliche Ordentliche Veranlagung) allows workers subject to withholding tax to request a full ordinary assessment, identical to that of C permit holders. This can be advantageous if actual deductions exceed the flat-rate deductions included in the barème.
Check the requirements
You are entitled to mandatory TOU if your annual gross income exceeds CHF 120,000, or if you receive income not subject to withholding tax (pensions, real estate, foreign income). You can also request voluntary TOU (quasi-resident) if at least 90% of your worldwide income is earned in Switzerland.
Submit the request on time
The TOU request must be submitted by 31 March of the year following the tax year. For example, for tax year 2025, the deadline is 31 March 2026. The deadline is absolute: a late request will be rejected.
Complete the ordinary tax return
Once the request is accepted, you must file a full tax return (like C permit holders), declaring all worldwide income and wealth.
Deduct actual expenses
In the ordinary return you can deduct actual expenses: pillar 3a, mortgage interest, excess medical expenses, donations, documented professional expenses. If these exceed the barème's flat-rate deductions, you will receive a refund.
Adjustment or refund
The tax authority compares the tax calculated under ordinary assessment with the tax already withheld at source. If you overpaid, you receive a refund. If you underpaid, you must pay the difference.
Warning: the TOU is irrevocable. Once requested, it applies to all income for the year in question and for all subsequent years while you are subject to withholding tax. It is not possible to revert to withholding tax only after opting for TOU.
Employer obligations
The employer plays a key role in withholding tax. Here are their main obligations:
Monthly withholding
The employer must calculate and withhold the tax from the gross salary each month, based on the applicable barème provided by the canton of employment.
Payment to tax authority
Withheld taxes must be remitted quarterly (or monthly, depending on the canton) to the withholding tax office of the canton where the work is performed.
Data communication
The employer must register every new employee subject to withholding tax and communicate any changes (marital status, number of children, end of employment) within 8 days.
Annual adjustment
At year-end the employer must perform an adjustment by calculating the tax on the total annual income and comparing it with the monthly deductions made.
Collection commission
In compensation for administrative costs, the employer receives a collection commission (typically 1–2% of the tax withheld, depending on the canton).
Practical tips
- Check the assigned barème: an error in the tariff code (e.g. A instead of B) can cost you hundreds of francs extra. Promptly inform your employer of any change in marital status or birth of a child.
- If your gross income exceeds CHF 120,000, you are required to apply for TOU. Prepare in advance by collecting all supporting documents for deductible expenses throughout the year.
- Pay into pillar 3a by 31 December: with TOU you can deduct it in full, but only if you actually paid it by the end of the tax year.
- If you are a cross-border commuter and work in a different canton from your place of residence in Switzerland, the withholding tax is calculated by the canton of employment, not the canton of residence.
- Keep your payslips: the monthly withholding tax calculation must be clearly shown. In case of error, you can request a correction from your employer or the tax authority.
- Use AccountEX to digitally archive payslips and expense receipts. If you apply for TOU, you will have all documentation ready and organised for the tax return.
Frequently asked questions
I received my C permit mid-year. How is my income taxed?
Withholding tax applies until the end of the month in which you receive the C permit. From the following month you are subject to ordinary taxation. For the transition year, you will receive both the withholding tax statement (for B/L months) and a pro-rata tax return for the remaining months.
Can I request TOU even if I earn less than CHF 120,000?
Yes, you can request voluntary TOU as a 'quasi-resident' if at least 90% of your worldwide gross income is earned in Switzerland. In this case you are entitled to the same deductions as C permit holders. The request must be submitted by 31 March of the following year.
Does withholding tax account for pillar 3a?
Yes, but only as a flat rate: the barème already includes a standardised deduction for pension provision. If your actual pillar 3a payments exceed the flat rate included, it is worth requesting TOU to deduct the real amount.
I am an Italian cross-border commuter: which rules apply?
Since 2024 the new Italy–Switzerland tax agreement is in effect. 'New cross-border commuters' (hired after 17 July 2023) are taxed both in Switzerland (withholding tax up to 80%) and in Italy (on total income with a tax credit). 'Old cross-border commuters' continue to be taxed only in Switzerland under the previous regime until 2033. In both cases, the applicable barème depends on the canton of employment.
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