Withholding Tax 2021: New Regulations

The changes to the withholding tax revision affect most companies. We will show you what it is all about.

What it is all about

The revision of basic principles creates a need to adapt

There are numerous legal changes to withholding tax: On 15 December 2016, Parliament passed the Swiss Federal Act on the Revision of Withholding Tax on Earned Income. The Withholding Tax Ordinance was issued in April 2018. On 12 June 2019, the Swiss Federal Tax Administration (FTA) published Circular No. 45 on Withholding tax on employees’ earned income from employment. In addition, ELM Standard 5.0 was published by Swissdec at the end of March 2020. Additions are expected to be made to this by the end of March 2021.

As an employer with employees who are liable to pay withholding tax, you need to be familiar with the new legislative basis and duly adhere to it in your payroll accounting. That applies whether you work with payroll software updated for withholding tax or whether you carry out the calculations manually.

The most important at a glance

The Federal Act and the Ordinance contain various relevant changes. Here is an excerpt of them:

  • Income subject to withholding tax is defined in a practically uniform manner.
  • You have to settle with all responsible cantons.
  • The withholding tax calculation within cantons in the monthly and annual models is defined uniformly.
  • Tariff codes are applied uniformly.
  • You must redefine the calculations for remuneration components prior to an employee joining the company, during employment and after the employee leaves the company and treat them the same within the two calculation models (monthly model, annual model).
  • Employers must not apply withholding tax code D (subsidiary income). However, multiple part-time jobs (even compensation from social security institutions) will be subject to a complex income extrapolation.
  • The withholding tax rate for the 13th monthly salary under the monthly model will now have to be determined using a special calculation formula, unless you work with software that is prepared for ELM 5.0.
  • Irregular hourly or daily wages (not a monthly payment) are subject to a uniform rate calculation.
  • The revised law firmly establishes the withholding tax liability for the de economic employer and for the staff lending from abroad.
  • The canton of residence at the end of the year or the end of the tax liability is responsible for the entire tax period. If the responsible canton changes due to a move of an employee, you must calculate and pay the withholding tax in the new canton from the following month.
  • The requirements for submitting a tax return (retroactive ordinary assessment) have been amended and expanded. The tariff rate correction no longer applies and recalculation of withholding tax is envisaged for a conclusive list of situations (there are differences between cantons).
  • The entitlement for provision for the employer was reduced from 1% to 2%.
  • The provisions for artists and athletes who are domiciled abroad were clarified and adapted.
  • Etc.

Where you can find important details

What legislators and standard setters want

How you can stay up to date

Well informed means better prepared

You can find information about current and future developments relating to withholding tax on our blog mybusiness.ch. We offer practical seminars to help you with implementation. We prefer to clarify individual questions and concerns in a personal conversation.

How we can support you

Take advantage of our expertise

Make use of our knowledge advantage and our expertise, as this topic is our profession and we deal with its legal developments and consequences on a daily basis.

You can count on us in these areas:
  • Analysis of your need to take action/review of the adjustments you have made
  • Evaluation of new HR/payroll software, for example in the secure cloud
  • Training of teams or individuals
  • Payroll review following implementation in order to check your cases and withholding tax calculations
  • Reassessment of withholding taxes until 31 March of the following year and further opportunities for tax optimisation
  • Renewal of withholding tax rulings with the authorities for validity as of 2021
  • New application for registration of the company in the concerned cantons 
Outsourcing as a far-sighted option

You can also simply outsource your payroll accounting to us in an integrated corporate environment. As withholding tax experts, we will work with you to ensure that everything runs smoothly from day one. As an additional option, you can use our Abacus cloud solution, which correctly reflects your circumstances. We would be pleased to help you in making these decisions and to train your users upon request.

Main stumbling blocks and issues

What are the main stumbling blocks and issues?

  • For whom and how is extrapolation for part-time work to be applied?
  • What are periodic and aperiodic elements?
  • How are corrections made?
  • Can back-calculation still be used in the software?
  • Does the family allowance actually have to be extrapolated again as a periodic element when extrapolating for part-time work?
  • How is the extrapolation applied if working hours cannot be determined?
  • How is the extrapolation applied in the case of an irregular payment if this is not defined in the hourly or daily wage?
  • Can extrapolation for part-time work go beyond 100%?
  • Do I have to transmit electronically with ELM 5.0?
  • What are the differences between Circular 45 and the ELM 5.0 guidelines? What has to be applied when?
  • How do I deal correctly with payments after the employee has left?
  • How are days working from home correctly taken into account for cross-border commuters?
  • How do I proceed if the employee has two places of residence?
  • How do I know whether we are the actual employer for our project workers?

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Contact our experts

Brigitte Zulauf

Leader Treuhand/Corporate Support Services Switzerland, Zurich, PwC Switzerland

+41 58 792 47 50

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