While many immigrants to Switzerland are initially happy about not having to file a tax return, since they initially only have a B residence permit, this usually becomes an issue much sooner than expected. Everyone who pays into the pillar 3a or wants to claim other deductions must submit a tax return. Or if you have income from another country, you must also file a tax declaration. This leads to a subsequent ordinary assessment (nachträglich ordentliche Veranlaung, NOV). After all, the withholding tax is already withheld from the salary, a kind of lump-sum down payment on the tax. Subsequently, however, the normal procedure of tax declaration and tax calculation is carried out and depending on the result of the calculation you will receive get something back or have to pay something extra.

No tax advice

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The World Income Principle

Some immigrants to Switzerland believe that income from different countries is taxed where it comes from. There is some truth to this, but it is only half the truth. In virtually all of Europe and beyond, the rule is that you always have to declare all the income you receive from all the countries in the world, and then you often pay taxes both in the country of source and where you live.

So if you moved to Switzerland and then receive a local salary here, then this will be taxed in Switzerland at the place of residence.

Whenever you also receive dividends or rental income from your home country, for example the UK, then this UK income usually has to be declared in the tax return in UK as well as in Switzerland. Likewise it is in principle taxable in both countries at the same time. Although double taxation agreements help to avoid paying taxes twice, it does not make things any easier in terms of bureaucracy. They do not prevent you from filing paperwork twice. Instead, you still have to file a double tax return and then split the tax payment between two countries according to often complex rules that not every tax advisor understands.

So the hassle of filing tax returns and dealing with the rules is sometimes worse than the actual tax behind it.

The withholding tax was meant to simplify things

Many countries have a withholding tax on wages or other sources of income like dividends from stocks. On the one hand, the purpose of this is to withhold something at the source that the recipient might not otherwise declare correctly in a tax return. On the other hand, a seasonal worker who only works in Switzerland for a few months may not be within reach of the tax office after they have left again to some other country. And finally, companies/employers are more experienced at preparing all sorts of forms and reports than most individuals. 

This is why not only Switzerland, but also many other countries around the world have a withholding tax on wages and also dividends that companies pay out to you.

And this can actually simplify your life in the simplest of cases: If you receive a salary in the UK for half the year and then work in Switzerland for a few months and then return again to the UK, you don't necessarily have to file a tax return in Switzerland nor the UK. At least not by law.

The reality is different

Nowadays, however, many people receive not only a simple and singular salary, but many other types of income on top. You might rent out an existing property in another country and then have rental income. Or you receive dividends from various countries of the world through your stock portfolio. Or you make trading profits from cryptocurrencies. Or you get stock options from you employer. The list is almost endless.

Techies and scientists in particular rarely have only the simplest of income types, wages. For good reasons, saving everything in cash is not a good strategy (no investment advice) and not benefiting from your employer's success through stock options is also giving up on a great way to build up your wealth over time (no investment advice) .

And there are not only multiple sources of income but also quite a few types of deductions that you could use in a tax declaration to get some of your hard-earned money back.

A subsequent ordinary assessment (NOV) is mandatory from CHF 120K on

If the taxable income of an individual in Switzerland exceeds CHF 120,000, a subsequent ordinary assessment is required in any case. This means that the normal tax calculation is always applied instead of the withholding tax method if the total annual income exceeds CHF 120K.

This includes income from wages / employment, investments, dividends, self-employment, pension funds and other sources.

Since the withholding tax is nevertheless withheld at the source, by your employer, for immigrants with residence permit B (no matter how high the salary), everything is then recalculated afterward and you get something back or have to pay extra. You can't escape this process by simply opting not to file a tax declaration, it's mandatory in this case.

Do I have to file a tax return?

In many cases, it will be beneficial to file a tax return to take full advantage of the Pillar 3a benefits and other benefits to ensure that you do not overpay taxes. Failure to file a tax return for the deduction when paying into Pillar 3a could result in double taxation and would defeat the purpose of Pillar 3a as a retirement and tax savings model. In addition, you must also file a tax return in Switzerland if you have additional income from other sources. This applies even if your normal salary is already taxed via the withholding tax procedure and your total income does not reach CHF 120,000 per year.

If you want to know more details about this topic, check out my book "How to Move to Switzerland".

Why you have to take the topic of tax declaration seriously

Due to the international tax data exchange agreement CRS, the data is often automatically reported to the Swiss tax office and any other countries where you have a residency, which can then contact you even years later and claim the missing taxes plus a fine. Since European and international cooperation on such issues tends to increase every year, you are not really protected from this if you "hide" in another country later. Automation will also make it easier for the tax office to come after people who failed to report even small amounts, so don't rely on that unless there is such an explicit rule of insignificance.

All in all, a subsequent ordinary assessment (NOV) is much more often necessary or useful than many immigrants in Switzerland think - especially in the case of software developers and other techies.

Software developers and other techies in Switzerland who are unaware of the importance of proper assessment should be aware of the many tax benefits they could be missing out on. By filing a tax return, they could potentially save thousands of Swiss francs in taxes, which could significantly improve their income and retirement savings. In addition, many cantons offer additional deductions for expenses such as travel, continuing education and more, which can be claimed when filing a tax return. With increased international cooperation under the Common Reporting Standard (CRS) agreement, it is even more important for immigrants to keep their tax affairs up to date, as failure to do so can result in heavy fines from the government.