The amendment to the federal law on the taxation of earned income at source, which came into force on 1 January 2021, will have practical repercussions on a number of taxpayers.
The most significant impacts are as follows :
- Foreign taxpayers, resident in Switzerland and holding a B (or L) residence permit, are now required to submit a complete tax declaration (‘mandatory TOU’) if their annual income exceeds CHF 120,000.00. A ‘complete tax declaration’ means a list of all the taxpayer’s income (from both Swiss and foreign sources) and all other assets, whether located in Switzerland or abroad. However, in order to avoid double taxation, taxable income and assets in another country are not taken into account for the calculation of the tax rate. Nevertheless, gross income from the gainful employment of spouses is not added to determine the minimum amount.
For taxpayers below this threshold of CHF 120,000.00 in income but with taxable assets (for Geneva, CHF 83,000.00 for single taxpayers and CHF 166,000.00 for a married couple), as in the past, filing a tax declaration is also compulsory.
In order to claim additional deductions on their income (especially contributions to the 3rd pillars a and b, redemption of the 2nd pillar, childcare costs), taxpayers below both of these thresholds may file a complete tax declaration to obtain optional subsequent ordinary taxation (‘optional TOU’).
All of the above-mentioned taxpayers subject to subsequent ordinary taxation (mandatory or optional) will remain subject to this regime until they are no longer liable for withholding tax, even if one of the reasons for mandatory subsequent ordinary taxation no longer applies
- As regards taxpayers domiciled outside Switzerland (especially in neighbouring countries), only persons who obtain a minimum of 90% of their income in Switzerland (quasi-residents) may, each year, request optional subsequent ordinary taxation (‘optional TOU’) to claim additional deductions on their income (especially property maintenance costs, contributions to the 3rd pillars a and b, redemption of the 2nd pillar, childcare costs). For persons ineligible for quasi-resident status, the Geneva tax adjustment form will therefore no longer enable them to request a correction to the scale or claim childcare costs, in particular.
These rules, applicable in all cantons from the 2021 tax period, will therefore require many people to draw up a tax declaration, whereas they were not required to do so in the past.
Even for taxpayers subject to mandatory ordinary taxation, insofar as the procedure is initiated by the taxpayers themselves (in Geneva, sending of a rectification form by 31 March of the following year), the tax authorities may accuse them of tax avoidance if these obligations are not respected.
This legal amendment is also detailed in a circular (in French) (Circulaire AFC No 45) published by the Federal Tax Administration (FTA).
If you have any questions on this matter, call 022 787 07 70, or contact form or
See also our associated publications :
- Overview of wealth tax in Switzerland and in Geneva
- Taxation: what are the consequences for owners, domiciled in Switzerland, of property located abroad
- Definition of the concept of tax avoidance and tax evasion in Swiss tax law and differences from other terms (in French)