Tax at source rectification
Claiming your tax benefits
Tax at Source Rectification: Many foreigners who are subject to tax in Switzerland waste money by not claiming their tax benefits, even though doing so can be relatively simple.
Foreigners moving to Switzerland are at least initially subject to the wage tax system, a tax at source deduction on their employment income. This system has significant advantages but also some pitfalls. In many situations, the situation is rectified by the requirement to also file a tax declaration, including actual income and deductions.
If the annual employment income is below CHF 120’000 (Geneva CHF 500’000) or if one is resident abroad, working in Switzerland as a weekly commuter, filing a tax declaration is not required or even not possible. Often, the tax at source deducted is accepted as final burden in such a situation. As standard deductions are incorporated in the tax tariff (insurance deduction, professional costs deduction etc.)
As mentioned, the standard deductions are incorporated in the tax at source tariff, there is no need to, for example, claim a tax refund because of the employee contributions to the OASDI system. On the other hand, there are costs that only specific individuals occur and they cannot be considered in the tariff. The most important ones are:
- Alimony payments
- Pillar 3a contributions or buy-backs to pillar 2
- Childcare costs, maybe even actual child deductions
- Costs for weekly commuting (double housing, transport)
- Debt interest deductions
- Others (e.g. donations, education etc.)
If you contribute to the pillar 3a (say CHF 6'000 which can easily give you a tax benefit of CHF 1'000), you will only get the tax benefit when letting the competent authorities know. Otherwise, there is no tax impact, even worse, you will likely occur a partial double taxation as this money is subject to tax (again) at withdrawal. If there are such costs and they cannot be claimed via a tax declaration, it is important to make use of the alternative procedure all cantons foresee, known as the "tax at source rectification" procedure.
If you identify costs that may be deducted, the request has to be filed in Geneva before the end of April of the year following the tax year. This deadline cannot be extended (very few exceptions in specific cantons).
The tax at source rectification procedure can basically only work in the taxpayer's favour: additional deductions are being claimed; if accepted, the tax burden is lower, leading to a refund, if not, there is no additional tax.
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