Withholding tax or ordinary taxation: what really changes
These are not two different taxes, but two ways of collecting the same one. One deducts every month based on an average, the other calculates once a year based on your actual situation. The difference lies in the detail — and in the timing.
Updated 2026-08-14
Many B permit holders believe they pay a “foreigners’ tax”, separate from the one Swiss residents pay. That is inaccurate. The tax owed is the same: federal, cantonal and communal income tax. Only the method of collection differs.
Withholding at source, mechanism by mechanism
Your employer applies a tariff published by your canton. That tariff depends on three parameters only: the amount of your salary, your family situation, and your religious affiliation. It withholds the corresponding amount every month and pays it to the administration.
That tariff is not arbitrary. It already builds in, on average, the deductions a taxpayer is normally entitled to: a share of professional expenses, of insurance premiums, of family allowances. It is a statistical flat rate, calibrated on a typical employee.
- Advantage: nothing to do. No tax return, no instalments, no balance to settle.
- Advantage: cash flow is smoothed. The tax leaves with the salary, month by month.
- Limitation: the flat rate ignores everything that sets you apart from the average — a long commute, a pillar 3a, a childcare place.
- Limitation: the tariff is calculated on a cantonal average, whereas the real rate depends on your municipality.
Ordinary taxation, mechanism by mechanism
This is the regime of every taxpayer domiciled in Switzerland. Once a year, you declare all your income and wealth, you claim your actual deductions, and the administration calculates the tax truly owed.
The calculation is then made with the multiplier of your municipality, and no longer with an average. Depending on where you live, that works one way or the other.
The two regimes side by side
| Withholding tax | Ordinary taxation | |
|---|---|---|
| Who calculates | The employer, from a tariff | The administration, from your return |
| When | Every month, on the salary | Once a year, after the fact |
| Calculation basis | Gross salary and flat-rate tariff | Actual income and wealth, actual deductions |
| Communal rate | Cantonal average | Multiplier of your municipality |
| Actual deductions | No | Yes |
| Wealth tax | Not levied | Levied |
| Foreign income | Ignored | Taken into account for the rate |
| Annual formality | None | Full tax return |
| Cash flow | Smoothed over twelve months | Instalments, then balance or refund |
What the change does to your cash flow
This is the aspect most often overlooked, and it has nothing to do with the final amount of tax.
Under the withholding regime, everything is settled as you go. Under ordinary taxation, the employer generally keeps withholding during the year, then the administration issues the final bill several months — sometimes more than a year — after the end of the year concerned. The refund, when there is one, therefore arrives late.
Wealth tax, the blind spot
Withholding at source covers income only. It completely ignores wealth — savings, securities, real estate, including abroad.
Ordinary taxation, on the other hand, includes it. Someone with substantial savings or a property may therefore see a tax appear that they did not pay before, and which cancels out the gain obtained on income. This is one of the situations where the TOU turns against the person who requested it.
A property abroad, even if not taxable in Switzerland, enters into the calculation of the rate applied to the rest. The rental value of a residence you own is likewise added to your income.
Who changes regime, and how
Three paths lead to ordinary taxation, and only one is a matter of choice.
- 01
Automatically, through the permit
Obtaining a C permit, or marriage to a person of Swiss nationality or holding a C permit, ends withholding taxation. The change takes effect the following month.
- 02
Automatically, through income
Above CHF 120'000 of annual gross income, ordinary taxation becomes mandatory — for the year concerned and those that follow.
- 03
On request, before 31 March
This is the only route that is up to you. It is irreversible and commits the following years — see the complete TOU guide.
So which one is more advantageous?
The question has no general answer, and be wary of anyone who gives you one. The result depends on your municipality, your actual expenses, your wealth and your family situation — four variables, none of which is average.
What can be said with certainty, on the other hand: the further you are from the typical employee on whom the tariff is calibrated, the more likely ordinary taxation is to favour you. A long daily commute, children in childcare, contributions to a pillar 3a, continuing education — each of these items widens the gap with the flat rate. See the deductions in detail.
Frequently asked questions
Does withholding tax cost more in general?
Neither more nor less by nature. It is a flat rate: it costs more for those with many deductions, and less for those with few. For a single person living close to work and without a pillar 3a, it is frequently more favourable.
I am about to get a C permit. Should I request the TOU in the meantime?
The C permit will switch you over in any case. The request still matters for years already elapsed and still within the 31 March deadline — but it no longer serves any purpose for the future.
Can my employer refuse to let me move to ordinary taxation?
No, it is none of their business. The request is made to the cantonal administration, not to the employer, who simply keeps withholding as before.
Do I pay twice during the transition?
No. The withholding tax already paid is credited in full against the tax calculated. You pay only the difference, or you get the excess back.
What if my income varies a lot from one year to the next?
That is an argument for caution. The TOU commits the following years, whereas the favourable calculation was made on a single one. An exceptional year — a large bonus, part-time work — should not decide a lasting regime.
Read next
- New to Switzerland: what awaits you on the tax sideB permit, deduction from salary, an incomplete first year, automatic switch: how Swiss tax works for someone who has just arrived.
- B permit deductions: what withholding tax does not give backTravel costs, meals, pillar 3a, childcare: the deductions the withholding tariff ignores, with the 2026 federal ceilings and the steps to follow.
- Deductible professional expenses, item by itemCommuting, meals, training, tools: what really is deductible, the federal ceilings in force, and when the flat rate beats actual expenses.
- Pillar 3a when you are taxed at sourcePaying into pillar 3a does not reduce withholding at source. Federal ceilings, the 31 December deadline, retroactive buy-backs since 2026 and withdrawal traps.
- Subsequent ordinary taxation, explained in fullWho may request the TOU, who is obliged to, until when, and why the decision is irreversible. The reference guide for B permit holders.
- When ordinary taxation costs you moneyThe TOU request cannot be withdrawn and commits the following years. Wealth, foreign income, an expensive municipality: the profiles that lose money.
- Reading your salary certificate, figure by figureThe Lohnausweis explained box by box: where to find the net salary, the withholding tax, and the only two figures needed to estimate your savings.