Taxation at source represents a special means for levying tax on income from gainful employment. The tax is not deducted by the employee, but rather by the employer.
Taxation at source is applied, for example, within the framework of the simplified settlement procedure. This is intended for short-term employment relationships or employment relationships with a limited scope – and explicitly also for babysitters and nannies. In such cases, the employee's nationality plays no role as regards the applicability of the tax at source. It can thus be applied for both Swiss and foreign employees.
As part of the simplified settlement procedure for employers, the employer deducts tax at soure directly from the wage and forwards this to the cantonal compensation fund office together with the social security contributions. The employer thus is only required to contact this authority. Furthermore, the contributions are settled just once a year. The employer assumes liability for the tax at source.
Within the framework of the simplified settlement procedure for employers, the employee benefits from an attractive tax rate of 5%. The employee receives a certificate for the delivered tax at source which he/she encloses with his/her tax return. No further tax is levied.
Furthermore, individuals are subject to taxation at source who
- have their tax domicile in Switzerland but do not yet hold a "C" residence permit or
- do not have a tax domicile in Switzerland for their income (cross-border commuters, weekly residents, etc.).
In these cases, the withholding tax rates vary from canton to canton. Further information in this regard can be obtained from the cantonal tax administrations.