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

For many people, payroll tax is simply a line item on their payslip, but what many don’t realise is that by adjusting their payroll tax, it is possible to reclaim some of the tax they paid the previous year. In this article, we explain how this 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 tax system actually comprises two distinct elements: the deduction of withholding tax (income tax is deducted by the employer directly from the salary each month and paid to the cantonal tax authority) and withholding tax scales, which are adjusted according to family circumstances and tax periods (collection scales (adjusted) and adjustment scales).

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 applicable to everyone, unlike Swiss residents, who benefit from actual deductions.

How does withholding tax work?

In the various withholding tax scales, each income bracket is assigned 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, the payroll department or the payroll agency will calculate the tax deducted at source, which will be withheld from the salary each month. This calculation will be based on the so-called collection scale.

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

Who is affected by withholding tax?

The following people are subject to withholding tax:

• Foreign residents in Switzerland who do not own property in Geneva, are not liable for wealth tax in the canton, and
  • holders of a B permit (residence permit)
  • holders of a B refugee permit (residence permit for recognised refugees who have been granted asylum in Switzerland)
  • holders of an L permit (short-stay residence permit)
  • holders of an F permit (foreigners admitted on a provisional basis, 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).
• Non-Swiss cross-border workers
  • in the canton of Geneva who are not Swiss nationals and hold a G permit
  • of Swiss nationality

Why is it possible to claim a refund of tax deducted at source?

Each month, the employer deducts tax from the employee’s salary in advance and in respect of income for the current year, without knowing certain details that will only become clear at the end of the year, such as:

• the exact salary received by the employee over the year. If, for example, a female employee works in Switzerland and her husband works in France, a specific tax scale (tax scale C) applies to this situation, taking into account a notional income of CHF 65,100 for the spouse working outside the canton of Geneva. It is certain in this case that the income actually received by the spouse during the current year will differ from the theoretical income in the scale, which means that the tax deducted each month differs from the tax actually due.
• The amounts paid by an employee into a third-pillar pension scheme. These amounts are deducted from their salary and therefore reduce the amount of tax payable by the same amount.

Given the way this tax is levied, it is easy to see why the amount charged is generally unfair and why, in most cases, it is advisable to apply for a reassessment.

Why are there several rates of withholding tax?

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

In particular, the following categories of withholding tax are distinguished:

• the tax scale (and adjusted tax scale) used by the employer to calculate the amount of the taxpayer’s withholding tax
• the adjustment scale used by the cantonal tax authorities.

Can a correction be made to the detriment of the taxpayer who requests it?

Yes. Let’s take, for example, the case where the taxpayer’s spouse, who is subject to withholding tax in the canton of Geneva, actually earns more than CHF 65,100.

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

Romain Clapier explains on his blog how to reclaim part of the tax deducted at source, noting: “If one of the spouses earns income outside the canton of Geneva that exceeds the theoretical threshold set by the canton (CHF 65,100), it is essential to request an upward adjustment to tax bracket C during the year to avoid having to pay a significant additional tax bill in the year following the employer’s withholding of tax at source. In the opposite scenario (where the spouse earns less than CHF 65,100), this adjustment may 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 a refund on tax deducted at source?

If a taxpayer meets all of the criteria below, then there is a high probability that they will NOT receive a tax refund:

• For singles
  • without children
  • employed on a full-time permanent contract
  • no 3rd pillar
  • no 2nd pillar buy-in
  • no training costs
  • no work carried out on a property
  • no CMU exceeding €10,000 per year
  • no maintenance payments
  • no costs for a second home
  • a tax rate correctly calculated by the employer.
• For married couples
  • without children
  • spouse not in employment
  • employed on a full-time permanent contract
  • no 3rd pillar
  • no second pillar buy-back
  • no work carried out on a property
  • no CMU exceeding €10,000 per year
  • no maintenance payments
  • no costs for a second home
  • a tax rate correctly calculated by the employer

If this description applies to you, you must also ensure—to be certain that a correction is not worthwhile—that your employer has deducted tax at source correctly. It is, in fact, common for companies to make mistakes, either because the employee has not provided the correct information to their employer, or simply because an error has occurred.

How do I apply for a correction to my withholding tax?

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

As there are many interrelated factors involved (the spouse’s tax return in France, the tax return in Switzerland, and the income declaration to the CMU for those who are registered with it), we recommend in this case that you consult a specialist tax advisor to accurately assess your situation. The fee for this type of enquiry ranges from CHF 100 to CHF 250 on average.

If you believe that a correction is necessary and would like to make 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, via the following link.

Once the RAC has received your application, it will send you an acknowledgement of receipt and, depending on your application, will take the necessary steps to recalculate your tax liability.

Please note: it is important to meet the deadlines, which are 31 March of the current year for the previous year. Once this deadline has passed, it is no longer possible to make any corrections.

Important: this article should under no circumstances be regarded as tax advice.