Procedure for Calculation of Withholding Tax (SAP Library

Procedure for Calculation of Withholding Tax

Statutory basis

Due to the various laws in the individual Swiss cantons, there are different procedures for calculating withholding tax.

The procedures mainly differ in the processing of the withholding tax calculation and in the amount of the withholding tax rates. In the German-speaking area of Switzerland, withholding tax is based on a monthly calculation. In the French- and Italian-speaking areas, however, a compensation calculation for the entire year serves as the base for the withholding tax calculation.

Each employer with withholding tax liable employees must deduct the withholding tax directly from the employee’s wages and transfer it to the tax office. Withholding tax liable are usually those foreign employees who do not hold a class C residence permit. The withholding tax must be transferred monthly to the tax office responsible. Smaller businesses must only transfer the withheld amounts quarterly.

The taxation rate for withholding tax is defined by law in each canton. Generally, the withholding tax rates are progressive. With an increase in wages, the withholding tax percentage is increased proportionately.

The withholding tax bracket is determined according to the employee’s marital status and number of deductions for children. In addition, the majority of the cantons take the difference between with or without church tax into account when determining rates. If the employee does not clearly define his or her personal status, the employer must apply the rate for singles.

A commuter rate is applied for cross-border commuters who are liable for withholding tax. The commuter rate is usually fixed. This means that it is not a progressive rate and is usually lower than the rate paid by foreign employees living in Switzerland.

Generally, the wages are taxed in the payment period in which they were paid out. This is valid for payments for previous periods, for example for retroactive payments for overtime hours worked.

When calculating withholding tax, the amount is generally rounded to the nearest 5 Swiss centimes.

Technical Aspects

You store the information on an employee’s obligation to pay withholding tax in Fiscal Data CH infotype 0038. If you do not specify a percentage or a fixed amount, you must specify the withholding tax rate applicable for the employee.

You use the canton indicator to define the canton for which the employee’s wages are to be taxed. Usually, this is the employee’s canton of residence. In order to simplify the taxation procedure, you can also specify the canton in which the company is registered. This canton’s tax office is then responsible for settling with the responsible tax offices of employees whose canton of residence is different from that of the company’s location. The canton of the employer’s location is always responsible for the cross-border commuter’s withholding tax.

Note You can import withholding tax rates from diskettes into the system in the view Display Withholding Tax Rates: Overview (V_T5C2H). To do this you use the reports RPUQSTC2 (for Diskettes from SECO (State Secretariat for Economic Affairs [SECO], formerly BWA) and RPUQSTC0 (for diskettes from the cantonal tax offices). The withholding tax diskettes are available from the tax administrations or the State Secretariat. SAP recommends that you use the diskette from the SECO because of the standardized formatting.

The system reads uses the cantonal indicator to apply the appropriate withholding tax rate during the payroll run. The resulting amount is saved as the Withholding tax (/310) wage type.