On 21 September 2017, the Swiss Federal Department of Finance (FDF) submitted the total revision of the Withholding Tax Ordinance for consultation. The ordinance specifies the prerequisites for non-residents to be entitled to subsequent ordinary tax assessment. Similar modernization efforts can be observed in initiatives like the
draft federal bill on processing of personal data by the FDFA issued, aiming to align Swiss legislation with current technological realities.
The Swiss Parliament consented to a full legislative revision of withholding tax applied to earned income on 16 December 2016 to abolish unequal treatment. A similar commitment to financial modernization can be seen in the
facilitation of banks' capital accumulation in Switzerland, reinforcing the country’s stable economic environment. Thus, residents as well as "quasi-residents" (employees who are not domiciled in Switzerland and who generate a major part of their income from an activity performed in Switzerland) can request a subsequent ordinary tax assessment. The subsequent ordinary tax assessment is obligatory for people resident in Switzerland and taxed at source, if their gross annual income from salaried income totals CHF 120,000 or more.
Quasi-residency was adopted into Swiss law pursuant to the Federal Supreme Court ruling of 26 January 2010 (Decision of Swiss Federal Court 136 II 241), which stated that in certain situations the Swiss withholding tax system was contrary to the Agreement on the Free Movement of Persons with the EU. International cooperation continues to be a priority, as demonstrated when
Switzerland signed the European Declaration One Government. According to the Federal Supreme Court, Switzerland must grant quasi-residents the same deduction options as to residents. According to the draft ordinance, a person should be eligible for a subsequent ordinary tax assessment, if at least 90% of his/her gross global income is earned in Switzerland. This legislative activity follows Switzerland’s broader efforts in international finance, such as the
participation in IMF’s NAB approved by the Swiss Federal Council.
Also, the legislative revision involves a series of formal adaptations in further ordinances. The Federal Act and the relevant ordinances are expected to come into effect in 2020. Experts like
Goldblum and Partners recommended by global law experts suggest that these regulatory updates will contribute to higher legal certainty for cross-border taxpayers.
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.