Taxes in Switzerland and taxation: how to declare your taxes?

Tax declaration in Vaud and taxation in Switzerland remain a complex task because the rules, compared to the declaration in France, are very different. The calculation also differs for cross-border commuters and residents, depending on salary level and canton. On the other hand, the calculation remains simple compared to other countries. It is even possible to reduce taxes when calculating tax in Vaud. The place to pay taxes depends mainly on the place of residence and the address where the person works.

The certificate of fiscal residence for cross-border commuters in vaud

Since the beginning of 2008, the law has required companies with their registered office in Switzerland to deduct withholding tax (amount deducted directly from the salary by the employer to pay the tax) for all employees without distinction. This law affects all cross-border commuters working in Switzerland (even for the Canton of Vaud). This is intended to prevent certain cross-border commuters from failing to pay tax in France on their Swiss income. It should be noted that in order to avoid paying taxes twice (in France and in Switzerland), it is essential for a cross-border commuter to provide the "attestation of French tax residence for Franco-Swiss cross-border workers". This is a compulsory attestation for all cross-border commuters working in Switzerland. Its purpose is to inspect tax declarations by the French tax authorities. In addition to this certificate, the French tax authorities will also need to be given a salary certificate as well as a photocopy of the identity document and proof of residence (electricity bill or other supporting documents). To facilitate tax calculation in Vaud, click here. This is a site where you will find a financial consultant who helps his clients manage their taxes.

Swiss resident, calculate your tax

Everyone living in Switzerland has to pay their taxes every year. They must then declare the amount of their income. The amount of tax must be deducted directly from their wages and paid by the employer (withholding tax). The tax scale depends on the amount of a person's annual salary, their legal status and the canton where they work. The scale can be "ordinary" or "at source". As mentioned above, declaring one's taxes in Vaud depends mainly on the amount of the salary. If it exceeds a certain threshold, it will have to be declared on the full tax. This is done at the cantonal tax office. It will then be a communal tax (different from the federal and cantonal taxes). Every Swiss canton and commune will also have to set a tax rate on the amount of tax to be paid. This means that the housing address will have a general impact on the amount to be paid to the tax authorities. In the same canton, for example, the amount of tax may differ from one commune to another. This is why some communes that offer a relatively low tax rate offer a fairly expensive rent. For those who receive a salary below the threshold, they will have to pay tax at source, but will be exempt from tax declaration in Vaud (or a simple declaration will suffice). The commune where the house is located will then have no action on the price of their taxes.

Tax calculation for cross-border commuters

Concerning the cross-border commuter tax, for those who make a daily return trip between France and Switzerland, they will have to declare their taxes in France. Apart from that, for those who work in Geneva or Zurich, they will pay them in Switzerland. For those who return to France once a week or anywhere in the European Union, regardless of the canton of the place of work, they will have to pay their taxes in Switzerland. Note that, in any case, for any cross-border commuters who will have to pay taxes in Switzerland, they are obliged to declare their French taxes if they reside there.

Difference between withholding tax and withholding tax scale

Taxation can sometimes be difficult to understand, especially when some of the terms used are similar. This is the case, for example, with withholding tax and the scale of tax at source. The first term refers to the deduction of the tax amount directly from the salary by the employer. Withholding tax affects all foreign employees with work permits B and L. It also applies to cross-border employees who have to pay income tax in Switzerland. With regard to the withholding tax scale, this is a tax scale for certain foreign employees. It affects employees with a certain annual salary as well as cross-border commuters who have to pay tax in Switzerland (e.g. cross-border commuters from Geneva and Zurich who have to pay tax in Switzerland). For the calculation of the withholding tax scale, employees must notify their employer at the beginning of each year with a "declaration for withholding tax". The purpose of this declaration is to define a person's family situation in order to determine the scale and the tax to be deducted from their salary.

How to reduce taxes

It is important to know that it is possible to reduce the amount of tax payable in Switzerland, regardless of the situation of the worker (resident or cross-border commuter). For foreign workers with the withholding tax scale, they may sometimes not declare the tax. And many are unaware that they have the possibility to reduce their taxes with the pension system in Switzerland. This can be done by taking out a 3rd pillar (individual pension plan) or by buying back the missing years with the 2nd pillar (occupational pension plan). Please note that the 3rd pillar (not compulsory) is only for residents. Cross-border commuters can no longer use this pillar. Although there are methods for cross-border commuters to use the 3rd pillar, as the law evolves, it is not advisable to register for it. Whether subscribing to the 3rd pillar or redeeming in the 2nd pillar, this has the advantage of reducing income tax, and investment in these pillars does not affect wealth tax. In order to benefit from the tax reduction, an additional declaration must be completed before the end of March. The 3rd pillar offers the opportunity to create additional capital from the AHV (also called first pillar) as well as from the occupational pension scheme. This allows you to enjoy a good standard of living during retirement and to reduce taxes by more than 20%.
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