In this new article on our topic of withholding tax, we will clarify the different scales that exist and provide practical information to help employers deal with this important aspect of payroll management.
- The different scales
Here is an overview of the main ones, with some specific cantonal features:
- Scale A: Applicable to single, divorced, separated or widowed persons with no dependent children. This is the standard scale for taxpayers with no dependants in their household.
- Scale B: For married couples living in the same household, with only one spouse having an income (from gainful employment, pension, unemployment, etc.),
- Scale C: Used for married couples living in a joint household where both spouses receive income (gainful employment, pension, unemployment, etc.). It applies equally to both spouses, whether one earns income in Switzerland or abroad.
- Scale H: This scale is intended for single parents (single, divorced, separated or widowed) living with children or other dependants (depending on the canton, to be validated by the cantonal tax authorities).
- Scale G: Applied to people receiving compensatory income (daily sickness benefit or unemployment benefit, for example).
2. Specific cantonal rules for Italian and German cross-border commuters
Some cantons have specific rules on withholding tax for cross-border commuters, particularly those from Italy and Germany. These special rates take account of international tax agreements between Switzerland and these countries, aimed at avoiding double taxation while ensuring that cross-border workers contribute to local taxes.
Italian cross-border commuters : R, S, T, U, V scales
In the cantons of Valais, Ticino and Grisons, new Italian cross-border commuters, i.e. those who start working in Switzerland after 17 July 2023, will be taxed according to different rates. These rates are the result of the tax agreement signed between Switzerland and Italy, which precisely defines the concept of ‘cross-border commuter’ and the applicable tax regime. Those who began working in Switzerland before this date remain subject to the rates defined in point 1 above.
The rates applied to Italian cross-border commuters are as follows:
- Scale R: Corresponds to scale A.
- Rate S: Corresponds to rate B.
- Rate T: Corresponds to rate C.
- Rate U : Corresponds to scale H.
- Rate V: Corresponds to rate G.
German border residents: Rates L, M, N, P, Q
Under the tax treaty signed between Switzerland and Germany, these workers are taxed at reduced rates if they meet the conditions of a ‘genuine cross-border commuter’. A German cross-border commuter is defined as a person working in Switzerland who returns to his or her place of residence in Germany on a daily basis.
The cantons using these rates are Basel (town and country), Aargau, Solothurn, Schaffhausen and Zurich.
The rates applicable to German cross-border commuters are as follows:
- Scale L: Corresponds to scale A.
- Scale M: Corresponds to scale B.
- Scale N: Corresponds to scale C.
- Scale P: Corresponds to scale H.
- Scale Q: Corresponds to scale G.
3. When and how to update an employee’s salary scale
- Change in family situation: In the event of marriage, divorce, separation or death of the spouse, the scale must be adjusted. Please note that the spouse’s situation must be known in order to move from a scale A to a scale B or C.
- Birth or adoption of a child: If an employee has a new child, the scale must also be adjusted to reflect this new family load. Scale H may apply if the employee becomes a single parent.
- Change of status: If an employee becomes an Italian or German frontier worker, the scale must be updated.
- Change of income: If one of the spouses of a married couple starts or ceases gainful employment, it is necessary to be informed and to review the scale (B or C) to be applied.
The scale must be updated in the month following the change. If the employer is informed late, he will have to correct the source tax rate from the month following the change and refund or deduct the amount of the source tax correction to his employee as appropriate and/or coordinate with the cantonal tax administration.
- Obligations and responsibilities of the employer
The employer is responsible for the correct calculation of withholding tax based on the cantonal tax scales. It must therefore ensure that changes are made in a timely manner when a change in personal circumstances occurs. This involves collecting and updating information about the employee’s situation, including whether or not they receive family or training allowances. It also means correctly identifying the situation and recognising directly whether or not it constitutes income (e.g. if the other spouse is retired, the source tax scale cannot be C). It is recommended that staff are reminded to report any changes within 14 days.
In conclusion, effective management of withholding tax scales depends on a thorough knowledge of the rules in force and the particularities of each canton. It is essential that employers remain alert to changes in their employees’ circumstances and encourage them to report them promptly.
Thanks to the expertise and mastery of the Ekspert teams, we are able to notify you as soon as a change in situation affects the withholding tax scale of your employees. This will simplify your day-to-day management and save you precious time.
