How to submit a correction to your pay-as-you-earn tax

For many people, withholding tax is just a line on their payslip. What many don’t realise, however, is that by filing a withholding tax correction, it is possible to reclaim part of the tax paid the previous year. In this article, we explain how it works and show you how to do it.

What is withholding tax?

In Switzerland, many foreign nationals are subject to a specific tax system commonly known as withholding tax. This system actually covers two different things: the deduction of withholding tax (income tax is deducted by the employer directly from the salary every month and paid to the cantonal tax authority), and withholding tax scales, which vary according to family situation and tax period (collection scales (adjusted) and correction scale).

It is important to note that these withholding tax scales differ from the standard scale used for Swiss residents, as they include flat-rate deductions that apply to everyone, unlike Swiss residents, who benefit from actual deductions.

How does withholding tax work?

In the various withholding tax scales, each income level corresponds to a tax rate.

Each tax rate applies to the taxpayer’s gross income. Based on the information provided by the employee to their employer at the start of the year, the HR department, payroll department or fiduciary calculates the withholding tax to be deducted from the salary each month. This calculation is based on the so-called collection scale.

Screenshot of the document that an employee in the canton of Geneva must give to their employer at the start of the year for the purposes of determining withholding tax

Who is affected by withholding tax?

The people affected by withholding tax are:

• Foreign residents in Switzerland who do not own property in Geneva and are not subject to wealth tax in the canton, and
  • holders of a B permit (residence permit)
  • holders of a B refugee permit (residence permit for recognised refugees granted asylum in Switzerland)
  • holders of an L permit (short-term residence permit)
  • holders of an F permit (foreign nationals provisionally admitted, such as provisionally admitted refugees)
  • holders of an N permit (asylum seekers)
  • holders of a Ci permit (family members of staff at permanent missions and international organisations).
• Cross-border workers
  • non-Swiss nationals in the canton of Geneva holding a G permit
  • Swiss nationals

Why is it possible to reclaim withholding tax?

Each month, the employer deducts a tax amount in advance from the employee’s salary for income earned during the current year, without knowing several factors that will only be known at the end of the year, such as:

• the exact salary earned by the employee over the year. For example, if a female employee works in Switzerland and her husband works in France, a specific scale (tax scale C) applies to this situation, taking into account a notional income for the spouse working outside the canton of Geneva of CHF 65,100. In this case, the income actually earned by the spouse during the current year will certainly differ from the scale’s theoretical income, meaning the tax deducted each month differs from the tax actually owed.
• Amounts paid by an employee into the third pillar. These amounts are deducted from the salary earned, thereby reducing the amount of tax paid accordingly.

Given the way this tax is collected, it is easy to understand why the amount is generally not accurate, and why in most cases it is worth applying for a correction.

Why are there several withholding tax scales?

The various cantonal tax authorities have therefore introduced different scales to take account of the specific circumstances of foreign taxpayers subject to withholding tax.

For withholding tax, a distinction is made in particular between:

• the collection scale (and adjusted collection scale), which the employer uses to calculate the taxpayer’s withholding tax
• the correction scale, used by the cantonal tax authorities.

Can a correction work against the taxpayer who requests it?

Yes. Let’s assume, for example, that the spouse of a taxpayer subject to withholding tax in the canton of Geneva actually earns more than CHF 65,100.

In this case, the amount of withholding tax deducted based on scale C (the amount deducted by the employer each month) is lower than what the taxpayer should actually pay given their situation.

Romain Clapier explains on his blog how to reclaim part of your withholding tax, and notes: “If one spouse earns income outside the canton of Geneva that exceeds the theoretical amount set by the canton (CHF 65,100), it is essential to request an upward adjustment to scale C during the year, to avoid having to pay a significant tax top-up in the year following the employer’s withholding of tax at source. Conversely, if the spouse earns less than CHF 65,100, this adjustment can also be requested, which will reduce the monthly amount of withholding tax deducted.”

Romain Clapier, chartered accountant and founder of Allo Déclaration

What are the chances of getting withholding tax back?

If a taxpayer meets all of the criteria below, there is a high probability that they will NOT get any withholding tax back:

• For single people
  • without children
  • employed full-time on a permanent contract
  • no third pillar
  • no second-pillar buy-back
  • no training costs
  • no work carried out on a property
  • no CMU exceeding €10,000/year
  • no maintenance payments made
  • no dual-residence costs
  • a tax rate correctly calculated by the employer.
• For married people
  • without children
  • spouse not working
  • employed full-time on a permanent contract
  • no third pillar
  • no second-pillar buy-back
  • no work carried out on a property
  • no CMU exceeding €10,000/year
  • no maintenance payments made
  • no dual-residence costs
  • a tax rate correctly calculated by the employer

If you recognise yourself in this description, you also need to be certain that your employer correctly deducted withholding tax, in order to be sure that a correction would not be worthwhile. Companies frequently make mistakes, either because the employee did not give their employer the correct information, or simply because of an error.

How do you apply for a withholding tax correction?

Given the number of factors involved in the calculation and each individual’s situation, it is very rare in practice for a taxpayer subject to withholding tax not to be eligible for a withholding tax correction, and therefore a refund.

Since many factors are also interconnected (the spouse’s tax return in France, the tax return in Switzerland, and the income declaration to the CMU for those affiliated to it), we recommend in this case using a specialist tax adviser to determine your exact situation. Fees for this type of request average between CHF 100 and CHF 250.

If you believe a correction is necessary and would still like to do it yourself, you can submit a request to the Cantonal Tax Authority. You will find the form to download and complete, as well as the address to which you can send your request, at the following link.

Once the Cantonal Tax Authority receives your request, it will send you an acknowledgement of receipt and, depending on your request, will take the necessary steps to recalculate the amount of your tax.

Please note: it is important to meet the deadline, namely 31 March of the current year for the previous year. After this deadline, it is no longer possible to file a correction.

Important: this article should not under any circumstances be regarded as tax advice.