Withholding tax: when the subsequent ordinary assessment pays off

Who is subject to withholding tax

Foreign employees resident in Switzerland who do not hold a C permit (settlement permit) are taxed at source. Exempt are people married to a Swiss citizen or to a holder of a C permit. The employer deducts the tax directly from the salary. The tax rates already include flat-rate deductions, for example for professional expenses and insurance premiums.

What changed in 2021

In the past, people taxed at source could claim individual deductions such as pillar 3a contributions or pension fund buy-ins through a rate correction. Since 2021, this option no longer exists. If you want additional deductions, you have to opt for the full ordinary assessment, with a tax return, assets and everything that goes with it. Many guides on the internet still describe the old system.

Mandatory or on application

• Mandatory: The NOV is compulsory if your gross employment income exceeds CHF 120,000 in a year, or if you have income or assets that are not subject to withholding tax, such as securities, rental income or a property. The cantons set their own thresholds for this.
• On application: You get the NOV if you request it from the tax authorities by 31 March of the following year. Applications received later are not considered.
• Resident abroad: Cross-border commuters and weekly residents without a Swiss residence can request the NOV if at least 90 percent of their worldwide income, including that of their spouse, is taxable in Switzerland. This is known as quasi-residence. This application must be made anew every year.

For people resident in Switzerland, the following applies in both cases: once an NOV has been carried out, it remains in place until your withholding tax liability ends. Even if your income later falls again.

Decision guide

Is the NOV worth it for you?

Five questions, a first assessment.

Do you live in Switzerland?

Yes No

Do you earn more than CHF 120,000 gross per year?

Yes No

Are you planning pillar 3a contributions or a buy-in to the pension fund?

Yes No

Do you have other high deductions, such as further training, childcare, maintenance payments or interest on debt?

Yes No

Do you have significant assets or a property abroad?

Yes No

Answer the questions to get an assessment.

When the application pays off

In the NOV, you can claim your actual deductions, not just the flat rates included in the tax rate. This is of interest above all for:

• buy-ins to the pension fund
• pillar 3a contributions
• high further training or commuting costs
• childcare costs paid to third parties
• maintenance payments to a divorced spouse
• interest on debt

Buy-in to the pension fund

CHF 30,000

Effect under withholding tax

none

Effect in the NOV at a 30% marginal tax rate

around CHF 9,000

After a buy-in to the pension fund, you cannot withdraw the money as a lump sum for three years. This matters if a return to your home country is on the horizon.

When you are better off without it

• Assets: Withholding tax only covers income. In the NOV, you also pay wealth tax and must declare your worldwide assets: accounts and securities abroad, but also the flat in your home country. Although it is not taxable in Switzerland, it increases the tax rate. More on this in the article Holiday home in Croatia.
• Few deductions: If you have hardly any deductions beyond the flat rates, the NOV brings little and costs you a tax return every year.
• Uncertain future: Because the application cannot be withdrawn, you commit yourself for all following years until you receive a C permit or leave Switzerland.

That is why, before an application, I calculate both options, for the current year and for the years after. The decision is rarely as clear-cut as it seems at first glance.

How it works

You submit the application to the tax authorities of your canton of residence; many cantons provide a form for this. The canton in which you live at the end of the year is responsible. You then receive a tax return. The withholding tax already deducted is credited: you get back any tax overpaid and pay any difference.

31 March is a strict deadline. If you want to apply for the 2026 tax year, you must have submitted the application by 31 March 2027. Unlike the tax return, there is no extension.