Since 01.01.2021, it is possible for the first time for all foreigners without a C-Permit who are resident in Switzerland, to apply for a subsequent ordinary assessment (German: nachträgliche ordentliche Veranlagung or short NOV).
But is it really beneficial to you to do the tax return or stay taxed at source (withholding tax)?
As a person liable to withholding tax, its a legitimate question whether an ordinary assessment might offer more savings potential or get a tax refund respectively.
Subsequent ordinary assessment (NOV)
Apart from exceptions, there are 3 forms of subsequent ordinary assessment:
- Automatic subsequent ordinary assessment (over CHF 120’000 gross income)
- Voluntary subsequent ordinary assessment
- Mandatory subsequent ordinary assessment (without CHF 120’000 gross income)
The last one is tricky: You have to apply for subsequent ordinary assessment on the basis of certain conditions, but you often don’t even know that you have to. In such cases, it can happen that you receive a tax return for a year which dates 2-3 years back.
Automatic subsequent ordinary assessment
If the person subject to withholding tax receives an annual gross salary of over CHF 120’000, they are automatically subject to regular assessment and must complete the tax return, despite the fact that they do not hold a Swiss passport or a C permit.
In the case of married couples, compulsory assessment applies as soon as one of them exceeds the entry threshold of CHF 120’000 gross, the income is not added together for the entry threshold.
Voluntary subsequent ordinary assessment
In 80-90% of cases, it is worth applying for voluntary NOV. Especially those who can claim high deductions such as a long commute to work, further education costs, pillar 3a, etc., will in most cases save several thousand CHF in taxes through the tax return or get get a tax refund respectively. Warning: This depends on your individual situation, such as canton of residence, income and deductions.
Calculate this very carefully in advance, as you will have to complete your tax return for as long as you live in Switzerland once you have applied for NOV.
Our tax experts can take care of the often time-consuming but worthwhile calculation for you, get in touch with us.
A optional application must be submitted to the tax office only once in the following year by March 31 the latest. In other words, if you want to complete the tax return for the 2023 tax period, submit the application for NOV by 31.03.2024 (this deadline cannot be extended!)
This application only needs to be submitted once; you will always receive the tax return automatically in subsequent years.
Mandatory subsequent ordinary assessment (without CHF 120,000 gross income)
Did you know that you have to apply for NOV if you receive alimony, no matter how much you earn?
Many people don’t know this and so it can happen that you have to fill in a tax return for a year that was several years ago as soon as the tax office gets notice of it.
When do I have to apply for a retrospective ordinary assessment even if I earn less than CHF 120’000 gross?
If you earn income that is not subject to withholding tax (the list is not exhaustive):
- Income from self-employment
- Rental income from real estate in Switzerland
- Alimony for minor children
- Dividends from domestic and foreign stocks
- Pension from AHV, IV or pension fund
or if you have higher worldwide wealth.
In contrast to the above-mentioned threshold of CHF 120’000, which is regulated in the Withholding Tax Ordinance (Quellensteuerverordnung), the entry thresholds for income not subject to withholding tax and worldwide assets vary from canton to canton.
You can find a short list of the entry thresholds from some cantons here:
| Canton | Income not subject to withholding tax | Wealth p.P. |
|---|---|---|
| AG | From CHF 10’000 | From CHF 100’000 |
| BS | From CHF 500 | From CHF 75’000 |
| BE | From CHF 3’000 | From CHF 150’000 |
| LU | From CHF 2’000 Dividends / From CHF 5’000 Alimony | From CHF 62’500 |
| NW | No specific value. Each case is evaluated individually | |
| SZ | From CHF 2’000 | From CHF 50’000 |
| ZG | From CHF 2’000 | From CHF 100’000 |
| ZH | From CHF 3’000 | From CHF 80’000 |
What circumstances affect the amount of tax?
Returning to the question of whether a swiss tax return is more worthwhile than withholding tax. On the whole, it is not possible to make a blanket statement. There are many factors that are decisive and therefore it is always important to calculate the individual case taking these factors into account.
The following circumstances could indicate a higher savings potential:
- Residence in a tax-favorable municipality
- Move to a more tax-efficient canton at the end of the year
- High professional expenses
- High outside child care costs
- High continuing education costs
- Alimony payments
- Purchase into the pension fund and/or into pillar 3a
The following circumstances could indicate a negative tax effect after a subsequent ordinary assessment:
- Municipality with high tax rate as residence
- High assets and/or high capital gains
Recalculation of withholding tax
An application to correct the withholding tax is now only possible for the adjustment of the gross salary subject to withholding tax, the rate-determining income or due to incorrect application of the tax rate.
This is the case, for example, if working days are exempt from Swiss taxation or if child deductions have not been taken into account in the payroll.
However, since January 01, 2021, no additional deductions such as purchases into the pension fund or into pillar 3a can be claimed.
An application for a withholding tax correction must now be submitted in all cantons by March 31 of the following year. And, if a correction is necessary, it must also be submitted again each year.
The tax office reserves the right to waive a recalculation and to apply for an ordinary assessment as an alternative. This can also have negative consequences for the taxpayer, i.e. additional payments instead of tax refunds are due. Cantonal regulations vary here.
Conclusion
From experience we conclude that an ordinary assessment is not worthwhile in all cases. The tax rate of the municipality of residence has the greatest influence. This means that an ordinary assessment in a municipality with a favorable tax rate is often worthwhile.
An ordinary assessment should be avoided if the residence is in a municipality with a high tax rate and if no further deductions can be made.
I would like to calculate whether I can save tax by filing a tax return.
If you are still unsure whether you are paying too much tax and could save taxes by filing a tax return, our tax experts can do the calculations for you so that you have full certainty.
We also take into account factors that could change in the future, e.g. marriage, birth of a child, salary increase, pillar 3a payment, etc.
Our clients often save several thousand francs in taxes each year simply because they switch from withholding tax to ordinary tax. Or we will prevent you from making the costly mistake of switching to ordinary taxation, as it would not be worth it in your case.
Feel free to contact us for a quote or make an appointment with us here.
