Managing Source Tax

This chapter provides an overview of source tax and discusses how to:

View and maintain source tax data.
Generate Source Tax reports.

Understanding Source Tax

Switzerland is a confederation of 26 cantons with approximately 3,000 municipalities. Accordingly, it has an extremely complex taxation system, with taxes imposed at federal, cantonal, and communal levels. Tax rates can vary from one canton to another.

Source tax applies to specific categories of foreign employees. It is calculated according to the canton in which a worker is employed, and employers take source tax deductions directly from the earnings of these foreign nationals residing in Switzerland. Employers must withhold the tax due and pay this source tax to the cantonal tax administration. Source tax, levied at the source, pays off federal, cantonal, and communal tax liabilities.

Calculating Source Tax

Data inputs for the source tax calculation are generally the same for all Swiss cantons. The employee's work location is read from the job records, and other source tax information is read from the employee Tax Data page along with stored tax rates for each canton, which together provide the raw data to be used in the calculation.

Not all cantons use the same mode for the regular calculation method to arrive at the source tax. For example, the regular calculation mode in cantons GE, FR, TI, and VD differs from the mode that applies in the 22 other cantons. In addition, the different selections on the employee Tax Data page determine what method applies to different employees (all methods are applicable to all cantons).

Note. The different calculation modes for the regular method are described in grater detail later in this chapter.

Note. There is special tax treatment for French Cross-Border workers in the following eight cantons: BE, BL, BS, JU, NE, SO, VD, and VS. Working in one of these 8 cantons, having a home address country equal to France, and having no assignment for source tax qualifies employees for this type of taxation. Cross-border employees are reported with their taxable gross on the Cross-Border Report for France. The employer then provides the list of employees to the tax administration which reports the gross to the location of residence. Thus the employees have their Swiss earnings taxed in France.

Calculation Methods

This section discusses:

Primary tax calculation methods.
Exceptions to the regular method.

Primary Calculation Methods (determined by selection on employee's Tax Data page )

There are four primary methods used to calculate an employee’s monthly source tax deduction, which are managed on the Tax Data page. These methods are summarized as follows:

Method Name	Description
Regular	A rate is selected from the tax table of the employee's tariff based on the applicable calculation mode. The system uses this rate to calculate the tax based on the employee's actual earnings.
Fixed Percentage	A rate is entered in the employee's Tax Data page. The system uses this rate to calculate the tax based on the employee's actual earnings.
Fixed Deduction	An amount is entered in the employee's Tax Data page. This amount is withheld monthly as the source tax deduction.
Fixed Base	An amount is entered in the employee's Tax Data page. Depending on the tax tariff, this amount determines the source tax rate. The system uses this rate to calculate the tax based on the employee's actual earnings.

Calculation Modes for Regular and Fixed Base Methods (determined by assigned canton)

Within the regular source tax calculation method there are exceptions for cantons GE, FR, TI, and VD. Instead of calculating the tax on a monthly earning base, these cantons calculate source tax as explained in the following table:

Canton	Mode
GE	An annual adjustment is made in the December payroll for employees who meet the following conditions: full-time (FTE = 100%) for the entire year, employed in GE the entire year, with the same tariff for the full year. For other employees the tax is calculated using the monthly mode as is done in the 22 other cantons.
FR	Each month the rate is calculated on the estimated yearly income, which is equal to: (actual regular earnings / actual months * 12) + actual bonus payments. Depending on the tax tariff, this amount determines the source tax rate. With this rate the tax is calculated using the employee's actual earnings (see CH_TX_07_YTD) within the tariff(s). Then the amount of tax paid is subtracted and the remaining amount is the source tax for the month.
TI	Each month the rate is calculated on the monthly salary. In case of the following events, a tax adjustment is made: December payroll or termination, or departure from the TI canton. For the TI canton, the rate is calculated on the estimated yearly income, which is equal to: (actual regular earnings / actual months * 12) + actual bonus payments. Depending on the tax tariff, this amount determines the source tax rate. With this rate the tax is calculated using the employee's prorata actual annual earnings within the tariff(s) (by days within the tariff—see CH_TX_08_YTD). Then the amount of tax paid is subtracted and the remaining amount is the source tax adjustment.
VD	Each month the rate is calculated on the estimated yearly income, which is equal to: (actual regular earnings / actual months * 12) + actual bonus payments. Depending on the tax tariff, this amount determines the source tax rate. With this rate the tax is calculated using the employee's actual earnings (see CH_TX_07_YTD) within the tariff(s). Then the amount of tax paid is subtracted and the remaining amount is the source tax for the month.

Calculation Elements

The following tables contain the delivered elements used for source tax calculations:

Customer Maintained Accumulators	Description
CH_TX_02	Source Tax Base. Captures all taxable earnings, as well as ones that need to go into CH_TX_03 or CH_TX_04.
CH_TX_03	Includes earnings considered to be regular for annual estimation, but not prorated in case of mid month hire or termination.
CH_TX_04	Includes earnings considered to be bonus payments for annual estimation.
CH_TX_05TI	Lump Expenses TI. Up to an annual limit of 12, 000, only half of the payment is taxed.
CH_TX_12	Earnings in this accumulator contribute to the lookup amount that determines the rate. The following 2 scenarios can be addressed using this accumulator: Earning adds to CH_TX_02 and subtracts from CH_TX_12 (earning is taxed, but is not taken into account to determine the tax rate). Earning adds only to CH_TX_12 (earning is not taxed, but is taken into account to determine the tax rate). Functional requirement for other possible combinations are not known.

System Maintained Accumulators	Description
CH_TX_07_YTD	Taxable Gross in Tariff YTD. Used in calculation mode for VD and FR to split the actual yearly salary in case of tariff changes.
CH_TX_08_YTD	Taxable Days in Tariff YTD. Used in calculation mode for TI to split the actual yearly salary in case of tariff changes.
CH_TX_10	Source tax per month. Sum of all different source tax deductions (see Source Tax Deductions).

Source Tax Deductions	Description
CH_TX_D12	Regular or fixed base method: Source tax contribution (except VD and FR).
CH_TX_D31	Regular or fixed base method: Source tax contribution VD and FR.
CH_TX_D51	Regular method: Yearly adjustment GE and TI.
CH_TX_M00	Manual entry of deduction via positive input (manual corrections) all cantons.
CH_TX_M01	Fixed percent method: Source tax contribution all cantons.
CH_TX_ M02	Fixed amount method: Source tax contribution all cantons.

Viewing Delivered Elements

The PeopleSoft system delivers a query that you can run to view the names of all delivered elements designed for Switzerland. Instructions for running the query are provided in the PeopleSoft Enterprise Global Payroll 9.0 PeopleBook.

Viewing and Maintaining Source Tax Data

To view and maintain source tax data, use the FAK/SourceTax(Company) CHE (GPCH_TX_FAK_STAX) component.

This section discusses how to:

View source tax details.
Enter source tax data.
View source tax percentages.

There are four steps to viewing and maintaining source tax data in Global Payroll for Switzerland, but only the third step is required.

View PeopleSoft-delivered municipality code information for each canton.
View PeopleSoft-delivered source tax data for each canton, to determine source tax rates that apply to foreign nationals in the individual Swiss canton.
Enter source tax data for foreign residents in Switzerland.
View PeopleSoft-delivered source tax percentage data, including withholding commission percentages.

Pages Used to View and Maintain Source Tax Data

Page Name	Object Name	Navigation	Usage
Municipality Code	GPCH_TX_VILLAGE	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Municipality Codes CHE, Municipality Code	View and update municipality codes and their descriptions for a selected canton. PeopleSoft maintains and delivers the Municipality Code table, but you can modify the data yourself if necessary.
Source Tax	GPCH_TX_SETUP	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Source Tax CHE, Source Tax	View source tax details such as source tax tariffs and basis, amounts and percentages. PeopleSoft delivers and maintains the Source Tax table, but you can modify the data yourself if necessary.
Tax Data	GPCH_TX_DATA	Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Source Tax Data CHE, Tax Data	Enter source tax data for a foreign employee.
FAK/Source Tax Percent	GPCH_TX_FAK	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, FAK/SourceTax(System) CHE, FAK/Source Tax Percent	View source tax details such as source tax tariffs and basis, amounts, and percentages.
Canton (FAK/Source Tax)	GPCH_TX_FAK_STAX	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, FAK/SourceTax (Company) CHE, Canton (FAK/Source Tax)	View and edit source tax settings such as source tax language and source tax report frequency. See Entering FAK Data.

Viewing Source Tax Details

Access the Source Tax page.

Warning! The PeopleSoft system delivers and maintains the data on the Municipality Code and Source Tax pages. Although you can modify this data if necessary, you should carefully consider the impact of these changes.

Tariff

Withholding Tax Tariff	Displays the Withholding Tax Tariff code.
Read Data	Click to display details about the rates for source tax.

Rates

Gender	If the system displays Unknown, the canton that you selected makes no distinction based on gender with regard to source tax tables. If a tariff is based on gender, select Male or Female accordingly.
Low Gross	Displays the lower limit for the tax increment.
Tax Amount	Displays the amount of source tax that is deducted.
Tax % (tax percentage)	Displays the percentage of source tax deducted.

Entering Source Tax Data

Access the Tax Data page.

Canton of Residence

The default value is the canton in which the selected employee lives. If the home address is not in Switzerland, the canton of the work location is the default.

Override

Select to override the canton. The Canton field becomes available, in which you can select a canton.

Municipality Code

Select the code of the municipality in which the employee lives. Prompt values are the municipality codes that correspond to the canton.

Withholding Tax Tariff

Select a tariff from the list of valid tariffs for the canton. This tariff is used to calculate the source tax under the regular, or standard method.

Exempt from Source Tax

Select if the employee is exempt from source tax.

Override Percent

Use this field to override the selected tariff and calculate the source tax using a fixed percentage.

Override Tax Amount

Use this field to override the selected tariff and apply the source tax using a fixed deduction.

Estimated Yearly Income

Enter an amount to override the annual income used in the regular source tax calculation. This amount is used to calculate the source tax under the fixed base method.

Viewing Source Tax Percentages

Access the FAK/Source Tax Percent page.

Withholding Tax on Commission

Enter a percentage, between 2% and 4%, that the employer deducts from paid taxes for administrative work involved in supporting source tax.

Generating Source Tax Reports

This section discusses how to:

Run the Source Tax Year report.
Run the Source Tax Month report.

Pages Used to Run Source Tax Data Reports

Page Name	Object Name	Navigation	Usage
Source Tax Year	GPCH_RC_TX01	Global Payroll & Absence Mgmt, Taxes, Source Tax Year Report CHE, Source Tax Year	Run the Source Tax Year report (GPCHTX01), which displays net salary as well as employee source tax contributions. For the cantons of Geneva and Waadt, the report prints on an official form and is normally required once a year.
Source Tax Month	GPCH_RC_TX02	Global Payroll & Absence Mgmt, Taxes, Source Tax Month Report CHE, Source Tax Month	Run the Source Tax Month report.

Running the Source Tax Year Report

Access the Source Tax Year page.

Cross Border France

Select to include French border workers in the report.

Canton

Select a canton to run the report for that canton only. If there is a required report appendix for that canton, it will also be created. For example, if you choose the canton of Geneva, the system creates the report appendix Attestation Quittance in French. And if you choose the canton of Tessin, the system creates the report appendix Attestato-Ricevuta in Italian.

If you do not select a canton, the report is printed for all cantons along with the required report appendices.

Formalix Output Path

Specify a directory on the server that the process can use to create the Formalix input CSV file.

Formalix imports annual tax results in the form of a CSV file and produces paper statements including the 2–D Barcode for the Attestation Quittance.

Running the Source Tax Month Report

Access the Source Tax Month page.

Canton

Select a canton to run the report for that canton only. If there is a required report appendix for that canton, it will also be created. For example, if you choose the canton of Geneva, the system creates the report appendix Attestation Quittance in French. And if you choose the canton of Tessin, the system creates the report appendix Attestato-Ricevuta in Italian.

If you do not select a canton, the report is printed for all cantons along with the required report appendices.

Canton of Residence	The default value is the canton in which the selected employee lives. If the home address is not in Switzerland, the canton of the work location is the default.
Override	Select to override the canton. The Canton field becomes available, in which you can select a canton.
Municipality Code	Select the code of the municipality in which the employee lives. Prompt values are the municipality codes that correspond to the canton.
Withholding Tax Tariff	Select a tariff from the list of valid tariffs for the canton. This tariff is used to calculate the source tax under the regular, or standard method.
Exempt from Source Tax	Select if the employee is exempt from source tax.
Override Percent	Use this field to override the selected tariff and calculate the source tax using a fixed percentage.
Override Tax Amount	Use this field to override the selected tariff and apply the source tax using a fixed deduction.
Estimated Yearly Income	Enter an amount to override the annual income used in the regular source tax calculation. This amount is used to calculate the source tax under the fixed base method.