Since the 1.1.2021, 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 (nachträgliche ordentliche Veranlagung or short NOV). But is it beneficial to you to do the tax return or stay taxed at source (withholding tax)?
As a person liable to withholding tax, one wonders whether an ordinary assessment might offer more savings potential.
Subsequent ordinary assessment (NOV)
An ordinary assessment can either be applied for on a voluntary basis or be required officially due to certain preconditions.
A voluntary application must be submitted to the tax office once in the following year by March 31 at the latest (this deadline cannot be prolonged). For the following years, a tax return must be submitted compulsorily every year.
If the person subject to withholding tax receives an annual gross salary of more than CHF 120,000, has worldwide assets of more than CHF 80,000 (married couples CHF 160,000) or generates income not subject to withholding tax of more than CHF 3,000 (for instance stock dividends or alimony), there is an obligation to file an ordinary assessment.
For married couples, the mandatory assessment applies as soon as one of the two exceeds the income limit.
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
- Unusual professional expenses
- High medical expenses
- High outside care costs
- High interest charges due to debt
- High costs for special meals
- High donations made
- High continuing education costs
- Non-continuous employment or fluctuating income
- Move to a more tax-efficient canton at the end of the year
- Purchase into the pension fund and/or into pillar 3a
- Alimony payments
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 refunds are due. Cantonal regulations vary here.
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.
Are you liable to withholding tax?
If you are still unsure whether it you would be much more favorable to do the tax return in switzerland, we can calculate the difference for you, so that you have certainty.
Often our clients save several thousand francs in taxes every year just because they switch from withholding tax to ordinary tax.
Feel free to contact us or make an appointment with us here.