The tax burden in Switzerland is already much lower than in many other countries. However, expats can still request a withholding tax refund. comparis.ch shows in detail which deductions can be taken by foreigners subject to withholding tax and how the process works.
First off: foreigner nationals with a B residence permit are subject to withholding tax, whereas there are also foreigners who are taxed normally like Swiss citizens. In particular these are: those with a C permanent resident permit, property owners, employees with a gross income of more than 120,000 francs as well as all foreigners with a spouse who is a Swiss citizen or in possession of a C permit.
Americans and Britons are familiar with the process. At the beginning of the year they file an income tax return for the preceding year and hope for an income tax refund.
One can also request a withholding tax refund in Switzerland. But there are differences, and not only in terminology.
Which deductions can I claim?
The types and amounts of deductions vary from canton to canton. Enquire with the local tax authorities for details, since the differences can be substantial.
The most important deductions for foreigners subject to withholding tax are administered for the cantons Aargau, Basel City, Thurgau and Zurich as follows:
Continuing education: Continuing education costs can be deducted if conducive to the practising of a profession, though training such as an apprenticeship, school or university does not qualify. Since the distinctions are sometimes unclear and subtle, it is best to first ask the tax officials if the programme in question applies.
Tax allowance for commute to work: In general, workers can deduct travel costs only for the use of public transportation. In the canton of Zurich, for example, this must amount to at least 2100 francs.
But what about car commuters? They can deduct travel costs only up to the amount of a public transportation pass. Car-travel kilometres are accepted only under certain circumstances. Example: the canton of Aargau recognises car-travel costs if the work commute adds up to more than 20,000 kilometres in a year and if travelling by car saves at least an hour compared to travelling by bus or train.
Retirement savings: Payments into Pillar 3a are deductible as are payments to a pension fund (Pillar 2) to fill provision gaps. Note on Pillar 3a: for 2014, employed persons can deduct a maximum of 6739 francs.
Alimony and child support for an ex-spouse and children are deductible – though divorce costs are not.
Child care: Parents can deduct the costs of child care with daycare or a nanny.
Costs of illness and doctors expenses are recognised by tax authorities only from a certain minimum amount. In the cantons of Aargau and Basel City, these expenses must work out to at least five percent of net income. Health insurance premiums are not deductible.
Interest on debt: Those making payments on a loan may deduct the interest costs on their withholding tax return.
Account management fees are not recognised by Swiss tax authorities.
Donations: Donations and membership fees for non-profit organisations are deductible. However, the cantons set a minimum amount, which is often a total of 100 francs.
How does the refund process work?
The forms are sent along with expense receipts to the tax office of the canton of residence. The authorities review the return, issue the tax payer a decision and reimburse the amount.
List of the cantonal tax authorities
Where do I find the necessary forms?
A place to go on the internet are the websites of the cantons. There you can find forms to download along with important information on filing, deadlines and necessary documentation.
Canton of Basel City (no working link available, yet)
Canton of Lucerne (no working link available, yet)
Note in the canton of Bern: those subject to withholding tax who want to receive a refund must complete a regular tax return the same as citizens do. For this, an application is required:
By when must the application be received by the tax authorities?
The deadlines vary by canton: in the canton of Zurich, tax payers must submit receipts for 2014 by 31 March. If this deadline is missed, the tax office will deny a refund. Other cantons have later deadlines. Foreign nationals in the canton of Aargau, for instance, have five years to request a withholding tax refund.
When do the tax officials issue a refund?
You will need to be patient. With the refund of withholding tax, the cantons can take their time – for example, up to 18 months in Zurich.
What do I do if the tax office does not recognise deductions?
Ask the tax officials for an explanation directly. You can make an appeal against the decision by legal process. You can find detailed information on this with the tax decision. In case of doubt, your tax adviser or lawyer can help.