Withholding tax reform 2021

Summary
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    La loi fédérale sur l’imposition à la source des revenus d’activité dépendante entre en vigueur le 1er janvier 2021. Elle introduit des nouveautés pour les contribuables et les employeurs.

    Adoptée par le parlement le 16 décembre 2016, cette loi modifie les modalités de l’imposition à la source des revenus de l’activité lucrative. L’ordonnance sur l’imposition à la source du 11 avril 2018 et la circulaire n°45 sur l’imposition à la source du revenu de l’activité lucrative des travailleurs publiée le 12 juin 2019 complètent le dispositif législatif.

    Réforme de l’imposition à la source 2021 : ce qui change pour les contribuables

    The revision introduces a subsequent ordinary taxation (which we will refer to as the subsequent tax return for the sake of simplicity) pour l’ensemble des contribuables résidents imposés à la source et, sous certaines conditions, pour les non-résidents. Ce mécanisme a pour but de mettre sur un pied d’égalité les contribuables imposés à la source et ceux soumis à la procédure de taxation ordinaire.

    Changes for Swiss residents

    1. La déclaration fiscale devient obligatoire pour toute personne soumise à l’impôt source qui perçoit plus de CHF 120’000 de revenu brut par an provenant d’une activité lucrative dépendante (pour les couples mariés, les revenus ne se cumulent pas, il suffit qu’un des deux dépasse le seuil pour que la condition soit remplie)
    2. The tax return also becomes mandatory when a person has other income not subject to source tax
    3. If the first two conditions are not met, a tax return can be filed with the FTA by 31 March of the year following the year in question.

    It should be noted that in each of the 3 cases mentioned above, the subsequent tax declaration will be mandatory until the end of the withholding tax liability.

    For point 3, we recommend that people wishing to claim the benefit of the declaration of actual expenses (subsequent tax declaration) should carry out a tax simulation beforehand with a tax expert in order to ensure that the withholding tax deducted by the employer is higher than the tax that would result from subsequent ordinary taxation, as this choice will be irrevocable until the end of the withholding tax liability. Translated with www.DeepL.com/Translator (free version)

    Our opinion: Swiss residents with a residence permit who currently receive other income not subject to source tax (alimony, foreign property income, dividends, etc.) should anticipate their future tax increase. This will make taxation fairer for new residents and the temptation to move to Switzerland for foreigners with quasi-resident status and multiple sources of income may be reduced in the coming years. Translated with www.DeepL.com/Translator (free version)

    Changes for Swiss residents

    The subsequent tax return remains optional for those who have more than 90% of their total income from Switzerland

    We would like to draw your attention to two points which we consider essential for non-residents:

    1. The declaration is not renewed every year as is the case for Swiss residents, the application will have to be made every year before 31 March of the year following the year in question to benefit from quasi-resident status
    2. People who do not fall into this category of taxpayers will no longer be able to claim the additional deductions that are still allowed in 2019 and 2020 (3rd pillar A, BVG purchase, alimony, training costs, team premiums, childcare costs)

    The withholding tax adjustment will remain possible to correct the following 3 points:

    • Incorrect calculation of gross taxable income
    • Incorrect calculation of the income determining the tax rate
    • Application du mauvais barème (passage du barème de perception

    Our opinion In the case of cross-border commuters from Geneva who are not quasi-resident in the sense of the tax law, they are the big losers of this reform and have every interest in reconsidering their tax situation. Indeed, tax optimisation through the lever of pension provision (LPP or 3rd pillar A purchase) will no longer be possible, and childcare costs and alimony payments will no longer be deductible from taxable income, which will considerably increase the tax burden on deaf people. 

    Il est à noter que les personnes qui résident en semaine dans le canton de Vaud (et qui retournent chaque semaine en France, appelés les frontaliers semainiers) et les personnes de nationalité suisse résidantes en France et travaillant pour l’Etat bénéficierons du statut de quasi-résident et pourrons faire valoir leur droit aux frais réel vaudois (déclaration fiscale ultérieure). Ces deux catégories concernent environ 40’000 personnes (estimation reçue des autorités fiscales vaudoises).

    The objective of this reform to ensure equal treatment of persons subject to source tax and persons subject to the ordinary taxation procedure is not fulfilled in our view. Indeed, the subsequent tax declaration is not compulsory for frontier workers who receive other sources of income not subject to source tax, whereas it is for residents. Thus, for equivalent income from gainful employment and for equivalent other income not subject to source tax, the tax rate of the Swiss resident will be higher than that of the frontier worker.

    De plus, le travailleur frontalier qui ne remplit pas les critères du quasi-résident n’aura plus droit à la déduction des cotisations 3ème pilier A et à la déduction des rachats LPP, ce qui ne paraît pas équitable vis-à-vis du résident suisse.

    What's new for employers

    Dès le 1er janvier 2021, les employeurs de personnes imposées à la source (débiteurs de la prestation imposable, DPI) doivent décompter directement avec le canton ayant droit à l’impôt et non plus auprès du canton où se trouve leur siège.

    Employers will now have to keep track of their employees' moves in order to settle the source tax with the relevant canton.

    Employers who employ people who have several gainful activities will have to extrapolate the income of these people to calculate the determining income that will set the tax rate:

    1. According to the actual overall occupancy rate of all activities if the employer is aware of this rate
    2. According to the full-time occupation rate when the overall occupation rate is not communicated by the employee
    3. According to the actual overall occupancy rate when part-time activities take place within the same group

    Scale D, which is currently used to tax compensatory income (sickness, accident and disability benefits) and ancillary income, will be abolished. Income earned in compensation will now be subject to Scale G.

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    Romain Clapier

    I am the founder ofAllo-Déclaration Suisse, a tax return service available to all. I am a Swiss certified accountant. I know perfectly well the Swiss and French problems linked to the taxation of individuals and in particular those of cross-border workers. I have also developed a service that enables me to check the accuracy of CMU (CNTFS) contributions paid by cross-border commuters.

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