Withholding taxation as of 2021

The desire to harmonize the approach to calculating withholding tax has been longstanding. Payroll and HR experts around the country were looking forward to these changes with high expectations. The Federal Tax Administration and the Swiss Tax Conference have, via Circular No.45, provided the details around the new regulation. In this short article, we would like to highlight the most important changes as well as what remains unchanged.

Highlights of the upcoming change

Generally, the changes are not as revolutionary as some of us may have expected. The two models, annual basis and monthly basis remain. As a reminder, the annual model concerns the cantons of Fribourg, Geneva, Ticino, Vaud and Valais while all the other cantons are applying a monthly model.

There is a long list of changes that will have to be applied as of January 1, 2021. Hereafter, we highlight what we consider the most seen topics that may have an impact on your payroll. This overview is very high level, please do not hesitate to approach us for more details on any of these topics. 

For a detailed look at what contain the regulation, see Circulaire 1-045-D-2019 de l’Administration fédérale des contributions AFC. The language of the Circulaire can be adjusted in the top right corner, unfortunately, no English version is available.

Be prepared

To be prepared for the new regulation regarding the withholding tax, additional information needs to be provided to the tax authorities, and consequently need to be collected from employees before January payroll in 2021. Make sure no information is missing in your HR system or look for support in obtaining this information. This will primarily concern information about any additional activities of employees. Please note that information must be provided in due course in order to guarantee an accurate tax calculation as of January 2021.