This is some text inside of a div block.
This is some text inside of a div block.

How to calculate Swiss withholding tax?

June 6, 2022
/
3

What is Swiss withholding tax? 

Withholding tax requires employees who receive a salary to pay their taxes up front each time that salary is processed. 

Who has to pay Swiss withholding tax? 

Employees who are not Swiss citizens or do not hold a C permit are required to pay Swiss withholding tax. Below is an overview of the different permit types in Switzerland. 

How does withholding tax get paid? 

The company that processes a salary deducts the withholding tax from their employees salary and pays it directly to the withholding tax office in the kanton that employees live in. For an employee that requires to pay withholding tax, the company must register this employee with the withholding tax office. 

When the company submits their withholding tax information, they will receive an invoice from the Kanton. Sometimes, this invoice is blank and it is up to the company to fill in the amount owed to the kanton for their withholding tax amount. 

Do I need to register my employees for withholding tax? Where do I register them? 

Should your employees not have a C permit or the Swiss nationality, you will need to register them with the withholding tax office. This is a separate tax office from within the Kantonal government. For example, in Zurich, you will need to register your employees with Quellensteuer | Kanton Zürich

Please note that you need to register your employees with the kanton they live in and not where the company is based. For example, if your company is based in Zurich but your employees live in Zug, you will need to register with the withholding tax office with the Quellensteuer - Kanton Zug

The office will provide you with a withholding tax number which is used to identify your company and your employees when you submit your employees withholding tax amounts each month. 

Why did the withholding tax office give me a commission to deduct? 

Because businesses are the ones submitting withholding tax amounts, the withholding tax office lets you deduct a specific percentage when you submit the withholding tax amount. This amount you get to keep. The withholding tax office will provide you with this percentage upon registering your employees. 

For example, they may say that you can deduct 2% from the withholding tax you submitted. This means that if you submit CHF 1,000 in withholding tax that was collected from your employees, you only have to pay CHF 980 and can keep CHF 20 for yourself. 

What is a withholding tax code? 

Each employee that has to pay withholding tax is given a 5 digit code that refers to a specific rate they have to pay. 

How do I calculate an employee’s withholding tax code? 

This five digit code is dependent on a number of questions. The questions include: 

  • Marital Status - Are you single, divorced, separated or widowed? If married, does your spouse work? 
  • Number of kids - How many kids do you have? If children, do they live with you?
  • Religion Tax - Do you want to pay a religion tax? 
  • Kanton - Which kanton do you live in? 

Based on these questions, we can determine someone's withholding tax code. 

For example, if someone:

  • is living in Zurich 
  • Single
  • has 1 child that lives with them 
  • and wants to pay a religion tax

His/her withholding tax code would be ZHA1Y. If we break this down:

  • ZH - The 2 digit short form of the kanton he/she lives in
  • A - The federal code that defines someone who is single
  • 1 - The number of children that lives with the employee
  • Y - He/she said “Yes” to pay a religion tax which is symbolized by a “Y”. Should they say “No”

How do I find the kanton abbreviations for the first 2 digits? 

For the first two digits, a company can reference the kanton short forms below

How does an employee’s marital status impact the withholding tax code? 

 An employee’s marital status impacts the 3rd character in the withholding tax code. So in the example above, ZHA1Y. "A" represents single. You can see all the codes below.

  • A - Single
  • B - Married with 1 person earning an income
  • C - Married with both earning an income
  • F - Someone living in Italy and working in Switzerland but their spouse is working outside of Switzerland. 
  • H - A single person living with kids, persons with disabilities or elderly that require his support
  • L - A single person living in Germany working in Switzerland 
  • M - Married living in Germany working in Switzerland with 1 person earning an income 
  • N - Married living in Germany working in Switzerland with both earning an income 
  • P - A single person living in Germany working in Switzerland with kids, persons with disabilities or elderly that require his support 

The below only applies to employees working in the Canton of Ticino and living in Italy. 

  • R - A single person living in Italy working in the Canton of Ticino
  • S - Married living in Italy working in the Canton of Ticino with 1 person earning an income 
  • T - Married living in Italy working in the Canton of Ticino with both earning an income 
  • IN - A single person living in Italy working in the Canton of Ticino with kids, persons with disabilities or elderly that require his support 

For employees living in France and working in the Cantons of BE, BS, BL, JU, NE, SO, VD and VS they receive a withholding tariff of SF. 

What if I am religious but don’t want to pay the religion tax? 

An employee can be part of a religion and choose not to pay a religion tax. This is optional for the employee to decide. 

What if I have more than 9 children, what would I add in the withholding tax? 

If you have more than 9 children, you cap the digit at 9. For example, if you have 12 kids, your withholding tax code could be ZHC9N. The fourth digit does not change to 10. 

Does my salary impact my withholding tax? 

Yes the more your employee’s make in gross salary, the more they will need to pay in withholding tax. Their withholding tax rate is dependent on their withholding tax code (ZHC2N) and their gross yearly salary. 

Where can I find the withholding tax rate for my employees? 

You can find the withholding tax tables at the federal government website for each kanton. You simply need to find the kanton and open the file to view the table. The tables can be found here - https://www.estv.admin.ch/estv/de/home/direkte-bundessteuer/dbst-quellensteuer/qst-tarife-kantone.html

For example, for someone who has a withholding tax code of ZHC1N and a gross salary of CHF 120,000, their withholding tax rate would be 8.91%. You can find the Zurich table here - https://www.estv.admin.ch/dam/estv/de/dokumente/qst/2022/tar22zh.zip.download.zip/tar22zh.zip

The employee’s monthly salary is CHF 10,000 (CHF 120,000/12 months) therefore his withholding tax amount would be CHF 891 (CHF 10,000 x 8.91%) on a monthly basis.