Withholding tax is income tax that is not collected via a tax return but directly at source: the employer deducts it from the gross salary every month and forwards it to the canton. For those affected it is a simplification — for the employer it is a duty with liability: whoever deducts incorrectly owes the difference.
What withholding tax is
It replaces the ordinary assessment for certain groups of people. Instead of filing a tax return once a year, the tax is withheld from the salary on an ongoing basis — federal, cantonal and municipal tax are already included in the deduction. The rate depends on income, the tariff code and the canton.
Who has to pay it
Foreign employees without a permanent residence permit — the main case.
Cross-border commuters, weekly residents, board members living abroad.
Permanent residents are assessed ordinarily — just like Swiss citizens.
Ordinary assessment applies even without an own C permit. The self-employed as well.
Calculation and tariffs
The basis is the gross monthly salary including all allowances: overtime, expense allowances with salary character, tips, bonuses, loyalty premiums and the 13th salary count in the month they are paid out — which can raise the rate-determining salary in that month. The applicable rate comes from the tariff code — a construction kit of three parts:
Example B2Y: married with one income, two children, liable for church tax. Every change in life changes the code.
- Tariff A: single persons without children
- Tariff B: married couples with a single income — graded by number of children (B0, B1, B2 …)
- Tariff C: married dual earners, also graded by number of children
- Tariff H: single parents with children in their own household
- Y/N: the final letter stands for with or without church tax — a detail that is easily forgotten and noticeably changes the rate
Special tariffs from double taxation agreements apply to cross-border commuters from certain neighbouring countries. And because every canton maintains its own tariff tables, the same salary is taxed differently in Zug and in Neuchâtel.
Canton of residence, place of work — and the 120,000 threshold
What counts is generally the employee's canton of residence — not the employer's registered office. Only for persons without Swiss residence (such as cross-border commuters) does the place-of-work principle apply. For employers this means: a team with homes in four cantons means four different tariff tables and four settlement relationships.
Important since the 2021 withholding tax reform: from a gross annual income of CHF 120,000, retroactive ordinary assessment is mandatory across Switzerland — the person files a tax return and the withholding tax paid is credited. Below that, they can request the assessment voluntarily until 31 March of the following year, for example to deduct pillar 3a contributions, pension fund purchases or further training costs — the tariffs themselves only contain the standard deductions.
Your duties as an employer
- Register employees subject to withholding tax with the canton and determine the correct tariff code — including the church tax letter
- Deduct and settle monthly, according to the tariff table of the correct canton
- Keep changes up to date: marriage, divorce, birth, change of religion, partner taking up work, permit change — each of these changes the code, usually from the following month
- Report and pay on time — there is a collection commission as a small compensation, but also liability for mistakes
How it works with payrollnow
With payrollnow, withholding tax is built into both models — the only difference is who clicks:
Self-service with the payroll software: you record the event, the system knows what needs to happen and guides you through — concretely:
Payroll outsourcing: with outsourcing, our Swiss service team handles withholding tax completely — registration, tariff assignment, monthly settlement and the communication with the cantons. You only report the events.
How tricky withholding tax becomes when assignments and cantons keep changing is shown in our practical article on withholding tax in staffing.
Frequently asked questions
Who has to pay withholding tax in Switzerland?
Foreign employees resident in Switzerland who do not hold a permanent residence permit (C permit) — unless their spouse holds a C permit or Swiss citizenship. In addition, persons resident abroad with Swiss employment income, such as cross-border commuters and weekly residents.
Which withholding tax tariffs exist?
Tariff A for single persons, B for married couples with one income, C for married dual earners and H for single parents — each graded by number of children and completed with a Y or N for church tax. Special tariffs apply to cross-border commuters from certain countries.
What happens above CHF 120,000 of annual income?
Retroactive ordinary assessment becomes mandatory: the person files a tax return and the withholding tax already paid is credited. Since the 2021 reform this threshold applies uniformly across Switzerland. Below the threshold, ordinary assessment can be requested voluntarily until 31 March of the following year — for example to claim pillar 3a contributions.
What must I do as an employer when circumstances change?
Marital status, children, religion, a partner taking up work or a permit change all alter the tariff code — sometimes mid-year. The employer must apply the new code from the following month and continue the settlement with the canton correctly. Exactly these changes are the most common source of errors in practice.