(November 28, 2014)

On November 8, 2014 the Swiss Federal Department of Finance FDF issued a press release announcing that the in the future, anyone resident in Switzerland whose earned income is taxed at source should have the option of a subsequent ordinary tax assessment. This option should also be available to people taxed at source who are not resident in Switzerland but earn a major part of their global income in Switzerland. Differences between the tax treatment of individuals taxed at source and those subject to ordinary taxation can be eliminated in this way. The press release furthermore announces that today, the Federal Council took note of the report on the results of the consultation procedure and adopted the dispatch for a corresponding legislative amendment.

According to the press release there is an immediate need to amend the current withholding tax system at the legislative level because of a Federal Supreme Court ruling. On 26 January 2010, the FSC stated for the first time that, in certain cases, withholding tax contravenes the Agreement on the Free Movement of Persons concluded with the European Union. According to the FSC, people taxed at source who are not domiciled in Switzerland and who earn more than 90% of their global income in Switzerland (so-called "quasi-residents") are entitled to the same deductions as those subject to ordinary taxation in Switzerland.

In the press release it is stated that following the revision, withholding tax will continue to be levied for the groups of people currently affected. In the future, however, all residents taxed at source should have the option of a subsequent ordinary tax assessment. Above an income they will officially be subject to a subsequent ordinary tax assessment as is the case under currently applicable law. All others can request a subsequent ordinary tax assessment. The supplementary ordinary tax assessment, which includes income and assets not subject to withholding tax, should also be replaced by the subsequent ordinary tax assessment. This will harmonise the procedure for residents subject to withholding tax.

According to the press release a subsequent ordinary tax assessment is also available to non-residents, provided they earn a major part of their income in Switzerland and thus meet the quasi-residency requirements. Withholding tax is definitive for all other non-residents. It replaces the taxes to be assessed on income from employment in the ordinary procedure. Following the restructuring of the withholding tax regime, the rate-correction tool for subsequently claiming additional deductions will be superfluous.

For further information click here to be forwarded to the press release (with a.o. Draft legislation attached to it) as published on the website of the Swiss Federal Department of Finance, which will open in a new window.

 

 

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