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Switzerland: Revised withholding tax rules for individuals, effective 2021

Switzerland: Revised withholding tax rules

The Swiss Federal Council released a circular on the revised federal withholding tax laws for individuals, providing a commentary and practical guide to these new rules.

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The changes to the law became necessary after several court decisions concluded that the existing withholding tax rules fell short of certain requirements (in particular, in regard to equal treatment of taxpayers and the freedom of movement regulations in respect of the European Union (EU)). The aim of the revised federal withholding tax law is to address these points.

One of the major changes is the introduction of a “quasi-resident status” as part of the Swiss tax law. This status will permit nonresident individuals to file a Swiss tax return if certain conditions are met. In addition, Swiss tax residents earning less than CHF 120,000 per annum will be able to file a Swiss tax return.

Swiss non-tax residents and holders of certain residency permits (L-permits and B-permits) earning less than CHF 120,000 gross per annum previously were excluded from filing Swiss tax returns. The new rules will allow all Swiss quasi-residents and employees earning less than CHF 120,000 gross per annum to request a subsequent ordinary tax assessment via the tax return filing process. Quasi-residents are employees who are not domiciled in Switzerland and who generate more than 90% of their worldwide income in Switzerland. The changes aim to reduce potential inequalities between foreigners subject to Swiss tax withholdings and Swiss citizens or C-permit holders who are not subject to the same tax regime.

Additional amendments concern certain procedural changes. The new withholding tax rules will be effective January 2021.


Read a July 2019 report prepared by the KPMG member firm in Switzerland

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