Source tax reform

The revision of the source tax comes into force on 1 January 2021. With Circular Letter No. 45 "Source Tax on the Employment Income of Employees", the Federal Tax Administration has explained the fundamental changes in a 69-page document.

https://www.estv.admin.ch/dam/estv/de/dokumente/bundessteuer/kreisschreiben/2004/1-045-D-2019.pdf.download.pdf/1-045-D-2019-d.pdf (only available in German)

The most important changes are the following:

Consistent definition of income subject to source tax
Now, employers must transfer the source tax to the responsible cantons (e.g. canton of residence of the employee)
Depending on the canton, a distinction is made between two different models: the monthly or the annual model
Consitent determination of the source tax rate
Employers no longer have to apply source tax code D (sideline income)
With part-time employment the source tax calculation is more complex
For irregular working hours (e.g. hourly wages), a consistent regulation applies to the determination of the source tax rates
In case of a change of the canton of residence, the source tax is transfered to the new canton of residence as of the following month
The subscription commission was reduced to 1-2%
In most cases, filing a tax return replaces the source tax tariff correction

Natural persons with tax residence or domicile in Switzerland

Previously, individuals who did not meet the requirements of either the subsequent ordinary assessment (NOV) or the supplementary assessment (EV) were able to submit a source tax tariff correction in order to claim tax-saving measures. Now, it is only possible to submit a source tax tariff correction for limited cases (e.g. correction of the source tax rate). Persons who do not meet the requirements of the NOV must submit an application for the filing of a tax return by 31 March of the following year in order to have e.g. their Pillar 3a payments taken into account.

Natural persons without tax residence or domicile in Switzerland

Up to now, even persons without tax residence or domicile in Switzerland (e.g. cross-border commuters or international commuters) have been able to submit a source tax tariff correction for the correction of the withholding tax. Now, these persons can also submit an application for the filing of a tax return. This application must be submitted each year by 31 March of the year following the relevant tax year. The following conditions must be met for the voluntary filing of a tax return in Switzerland:

the majority of the worldwide income (90 percent) is taxable in Switzerland,
the tax situation is comparable to that of a person residing in Switzerland, or
the filing of a tax return is required to claim deductions which are covered under a double tax treaty.