The tax year in Switzerland is the calendar year.
The respective tax return has to be filed by 31 March of the following year (a few cantons have different deadlines) in the canton where the taxpayer has been resident at the end of the respective tax period. Filing extensions are usually granted until September/November upon request. Married couples mandatorily file a joint Swiss tax return and are assessed together.
Wage withholding tax
Wage withholding tax is only applicable for resident foreign nationals or non tax residents.
Resident foreign nationals, who are taxed through the wage withholding system, can only (and have to) file a tax return if their gross employment income exceeds CHF 120,000 (Geneva: CHF 500,000) per year. If the threshold is not exceeded, there may still be a requirement to file a supplementary tax return if the individual has other reportable income or wealth. For this, the cantons have set different de minimis amounts.
Note upcoming changes for resident foreign nationals:
For the tax year 2021 (filing deadline in 2022) there will be a change for persons subject to withholding tax with Swiss residency who previously did not reach the required level in terms of annual gross salary of CHF 120,000. As of the 2021 tax period (i.e. for the first time at the beginning of 2022), such persons may apply for a subsequent ordinary assessment pursuant to Art. 89a a DBG in conjunction with Art. 10 QStV. For this purpose, they must submit a corresponding application to the competent cantonal tax administration by March 31 of the tax year following the due date of the benefit (for the first time by March 31, 2022 for the tax year 2021).
When submitting a retrospective ordinary assessment, utmost caution is required, as this may also result in a worse position. An application for a retrospective ordinary assessment for persons resident in Switzerland also has a legally binding effect for all future years. In other words, this person will always be subject to a retrospective ordinary assessment in the future. Thus, the voluntary application for a subsequent ordinary assessment requires a careful analysis.
Non-resident individuals (Swiss and foreign nationals) subject to wage withholding taxes usually cannot file a tax return for their employment income. If they own property in Switzerland, they have to file a special tax return in the canton where the property is located.
Individuals who cannot file a tax return may claim a correction of the withheld wage taxes in order to claim certain additional deductions or to correct a wrongly used tariff. Such wage tax correction has to be filed by 31 March of the following year with no filing extension available. The same deadline applies for non-resident individuals (EU/EFTA nationals) who file a tax return to claim additional deductions based on the new guidance.
Note upcoming changes for non Swiss tax residents:
As of January 1, 2021, the construct of "quasi-residency" will be officially introduced throughout Switzerland.
What is a Quasi-residency?
In order to meet the demand for equal tax treatment of Swiss and foreign nationals, a completely new construct was introduced in the Federal Law on Direct Federal Tax (DBG) as well as in the new Withholding Tax Ordinance (QStV): quasi-residence. It applies to persons liable to withholding tax who are tax resident abroad. These employees, who meet the requirements for quasi-residency, have the right to submit an application for subsequent ordinary assessment to the competent cantonal tax administration for each year until March 31 of the tax year following the due date of the benefit.
The requirements for a subsequent ordinary assessment in the case of quasi-residence are met if at least 90 percent of the worldwide gross income is taxable in Switzerland in the corresponding tax year. The legal basis for this is anchored in Art. 99a para. 1 let. A DBG in conjunction with Art. 14 QStV. In principle, this request can be made every year.
This construct requires increased attention and attentiveness, because for the calculation of the worldwide income of the withholding tax payer or for the 90 percent rule, the gross income of the spouse living in a legally and actually inseparable marriage is also added.
Payment of tax
Resident individuals, who are not subject to wage withholding taxes, are paying their taxes through filing a tax return. Cantonal and municipal taxes are usually collected on a provisional basis throughout the respective tax year. Cantonal rules differ. Federal taxes are paid on a provisional basis by 31 March of the year following the respective tax year. Final tax payments or tax refunds are due once the tax return has been finally assessed by the authorities. If there is a balance in favour of the tax authorities (i.e. the final tax liability minus any pre-payments), interest is usually levied between a certain due date and the date of the assessment as compensation for being able to use these monies in this period for private investments. Payment due date after having received the final tax assessment and bill is usually 30 days. After this, late payment interest is normally levied.
Non-Swiss tax residents (except those having a permanent residence permit or are married to a Swiss spouse or a spouse holding a permanent residence permit) are subject to wage tax withholdings on a monthly basis. The wage taxes cover federal, cantonal, and municipal taxes, and, if applicable, church taxes. If the employee is obligated to file a Swiss tax return, the final tax liability is assessed on the basis of the tax return and the already withheld wage taxes will be credited against this.
Non-resident taxpayers, regardless of the nationality, usually pay their taxes via wage withholding, which is normally the final tax liability, i.e. there are no further tax payments or refunds. Exceptions apply to non-resident owner of Swiss real estate, as they have to file a tax return and pay the respective taxes based on this return.
Tax audit process
Every tax return filed goes through a formal tax assessment process with the tax authorities in charge. In the course of the tax assessment process, the tax authorities may ask for additional information and statements. In the end a formal tax assessment is issued, in which the taxable factors, i.e. taxable and tax rate determining income and assets are noted. If no legal action is taken, the tax assessment comes into legal force, and based on this final tax bills are issued.
Statute of limitations
The right to assess a filed tax return by the authorities in general lapses five years after the tax period in question has elapsed. The tax authorities can open a special tax procedure up to ten years after the tax period has elapsed, if they identify that a previously assessed tax return has been faulty (or that no assessment was issued at all) if new facts or evidence is brought forward that was previously not known to the tax authorities.
Topics of focus for tax authorities
Each and every income tax return is reviewed and assessed by the tax authorities. Currently, the tax authorities are especially looking into expatriate status and the respective income/deductions declared in the tax return.
The authorities have begun to compare financial information received under the program for automatic exchange of information with the declarations in the tax return. They are requesting clarification from individuals where they spot inconsistencies.