What Are the Differences Between B and L Permits Regarding Taxes?

For expats in Switzerland, the residence permit has significant tax implications. The two most common permit types for foreign employees are the B permit (residence permit) and the L permit (short-term residence permit). This article explains how each permit type affects taxation, what obligations arise and what optimisation options exist.

Important note: The tax situation is individual and varies by canton. For binding information, contact the cantonal tax authority or a qualified tax advisor.

Basics: Who Is Subject to Withholding Tax?

In Switzerland, foreign employees without a settlement permit (C permit) are subject to withholding tax (Quellensteuer) — regardless of whether they hold a B or L permit. This also applies to other permit types such as G (cross-border commuter), F (temporarily admitted) or N (asylum seeker).

Withholding tax generally covers:

• Direct federal tax (DFTA / federal income tax)
• Cantonal and municipal tax
• Church tax (varies by canton)

The employer deducts withholding tax directly from the gross salary each month and remits it to the competent cantonal tax authority. The applicable tariff depends on marital status, number of dependent children, church membership and income level.

Important: Withholding tax is calculated using a cantonal average tariff. The actual tax rate of the municipality of residence is irrelevant under withholding tax — it only becomes relevant when a subsequent ordinary assessment (SOA) is carried out.

The B Permit: Residence Permit

The B permit is issued for employment contracts of at least 12 months or for open-ended contracts. It is valid for one year and renewed annually.

Taxation with a B Permit

• Withholding tax as the default — as with all foreign employees without a C permit.
• Mandatory subsequent ordinary assessment (SOA) is required in the following cases:
  • Gross employment income of at least CHF 120'000 per year; for part-year employment, the income is annualised to 12 months; spouses' incomes are not aggregated.
  • Additional income not subject to withholding tax, for example: investment income, rental income, alimony received or income from self-employed secondary activity.
  • Taxable assets exceeding cantonal thresholds (e.g. in Zurich: CHF 80'000 for singles, CHF 160'000 for married couples).
• Voluntary SOA: Even below CHF 120'000, a SOA can be requested by 31 March of the following year to claim additional deductions.

What the SOA Enables

Within an SOA, the following deductions can be claimed, among others:

• Pillar 3a contributions (maximum 2025: CHF 7'258 for employees with a pension fund)
• Actual professional expenses such as commuting costs or meal deductions
• Voluntary pension fund purchases (BVG / 2nd pillar)
• Third-party childcare costs
• Own professional further education costs (up to CHF 13'000, Art. 33 para. 1 lit. j DFTA)

Important: Irrevocability of the Voluntary SOA

A voluntary SOA application, once submitted, is irrevocable and remains in force until the end of the withholding tax obligation. In municipalities with high tax rates, ordinary taxation may exceed withholding tax — always consult a tax advisor before applying.

The L Permit: Short-Term Residence Permit

The L permit applies to fixed-term employment of less than 12 months and is closely tied to the duration of the employment contract.

Taxation with an L Permit

• Full withholding tax on employment income as the default.
• Mandatory SOA: L permit holders are also subject to mandatory SOA if their annualised income exceeds CHF 120'000 or if they have additional non-withholding income or taxable assets.
• Voluntary SOA: L permit holders can also voluntarily apply for an SOA (by 31 March of the following year) to claim deductible expenses such as Pillar 3a contributions or actual professional costs.

Typical Case Without SOA

No SOA application is needed when all of the following conditions are met:

• Income is below CHF 120'000 (annualised)
• No significant assets held in Switzerland
• No additional income not subject to withholding tax

In this case, withholding tax fully covers the entire tax liability.

Common Ground: What Applies to Both Permits

The following rules apply identically to B and L permit holders:

• Both are subject to withholding tax as the default
• Both can be obligatorily transferred to the SOA if income reaches CHF 120'000 or if additional income or assets exist
• Both can voluntarily apply for an SOA — deadline: 31 March of the following year
• Both must declare worldwide income and assets when carrying out an SOA
• For persons resident in Switzerland, a voluntary SOA application is irrevocable once submitted and applies until the end of the withholding tax obligation

When Is a Voluntary SOA Worthwhile?

For holders of both permit types, a voluntary SOA can be tax-efficient if there are significant deductible costs not fully covered by the withholding tax flat rate:

• Pillar 3a contributions: Maximum 2025 for employees with a pension fund: CHF 7'258
• Pension fund purchases (2nd pillar): Can result in substantial tax savings
• High professional expenses: When actual commuting costs significantly exceed the withholding tax flat rate
• Maintenance payments (alimony): Deductible when paid to a separated spouse or children
• Further education costs: Up to CHF 13'000 for own professional training

Caution: Those living in a municipality with a high tax rate risk a higher total tax burden with an SOA than with withholding tax. The application is irrevocable — always have the figures estimated in advance.

Social Insurance: Same Rules for B and L

Both permit types are treated identically in Switzerland for social insurance contributions.

AHV / IV / EO (Old-Age, Survivors and Disability Insurance)

• Contributions are deducted directly from wages (employer and employee each 50 %)
• Applies to both permit types without exception

Unemployment Insurance (ALV)

• Both groups are required to contribute
• Entitlement to unemployment benefits requires a sufficient contribution period
• B permit holders generally meet this condition more easily due to their longer stay in Switzerland

Health Insurance (KVG)

• All expats must take out mandatory basic health insurance within 3 months of arrival — regardless of permit type
• A special right of termination applies to health insurance when moving to a different canton

Special Situations

Cross-Border Commuters

Persons with an L or B permit who live abroad but work in Switzerland are subject to special cross-border commuter regulations under the relevant double taxation agreements (DTAs). Key points:

• The tax treatment depends heavily on the country of residence (specific arrangements with Germany, France and Italy)
• New rules on telework in border states have applied since 1 January 2025

Marital Status and Children

The withholding tax tariff is adjusted based on marital status and number of dependent children. Important:

• Changes such as marriage, birth of a child or separation must be reported to the employer immediately
• Incorrect tariff classifications result in additional tax payments or refunds

Foreign Assets When Carrying Out an SOA

Anyone who carries out an SOA (mandatory or voluntary) must declare worldwide income and assets. Taxes paid abroad are generally credited or excluded under the applicable DTA.

Quasi-Residency for Persons Resident Abroad

Persons without a domicile in Switzerland can apply for an SOA if at least 90 % of their worldwide gross income is taxable in Switzerland:

• This status is called "quasi-residency"
• The application must be submitted every year by 31 March of the following year
• This is an absolute deadline — no extension is possible

Practical Examples

Example 1: Engineer with L Permit, No SOA Application

A Spanish engineer works in Geneva for 6 months with a gross salary of CHF 8'000 per month. His annualised income amounts to CHF 96'000, which is below CHF 120'000. He holds no assets in Switzerland and has no other income. His employer deducts withholding tax monthly — his tax liability is fully covered without needing to file a tax return.

Example 2: Engineer with L Permit, Voluntary SOA

The same person has paid CHF 7'258 into Pillar 3a. To claim this deduction, he applies for a voluntary SOA by 31 March of the following year. The withholding taxes already paid are credited interest-free against the ordinary tax bill. The application is now irrevocable until the end of the withholding tax obligation.

Example 3: Management Consultant with B Permit, Mandatory SOA

An Indian management consultant works in Zurich with a gross salary of CHF 140'000 per year. Because her income exceeds the CHF 120'000 threshold, she is automatically transferred to the mandatory SOA. She must file a complete tax return, declaring all income and assets. The withholding tax paid is credited interest-free.

Example 4: Married Couple with B Permits

Both spouses hold a B permit. He earns CHF 130'000, she earns CHF 80'000. The incomes are not aggregated when checking the CHF 120'000 threshold. He is subject to mandatory SOA; she is entitled — but not required — to apply for a voluntary SOA. Once one spouse is subject to SOA, both are assessed together in the subsequent ordinary assessment.

Common Mistakes and Tips

Common Mistakes

• Wrong tariff category: Changes in marital status or number of children are not reported to the employer, resulting in incorrect withholding tax deductions.
• Missing mandatory SOA: Anyone with investment income, rental income or other income alongside their salary may be obligatorily subject to SOA — even without CHF 120'000 in salary.
• L permit means no tax return possible: L permit holders can and in some cases must also file an SOA.
• Missed deadline: The SOA application must be submitted by 31 March of the following year — this is an absolute deadline and cannot be extended.
• Voluntary SOA without prior calculation: Those living in a high-tax municipality may pay more with an SOA than with withholding tax.

Tips

• Report changes in personal circumstances (marriage, divorce, birth, change of address) immediately to the employer and tax authority
• Before applying for a voluntary SOA, estimate the individual tax burden through a professional or online tax calculator
• Make Pillar 3a contributions only once you have confirmed that an SOA is financially advantageous
• The cantonal withholding tax guide is the authoritative and most reliable source of information
• For complex situations such as cross-border income, foreign real estate or a change of permit type, seek professional tax advice

Conclusion

Both B and L permit holders are fundamentally subject to withholding tax — that is the shared starting point. The key difference lies in the likelihood of further tax obligations: while the L permit, in straightforward situations, often results in pure withholding taxation, B permit holders with higher incomes or additional assets are more frequently required to file an SOA. However, both groups can voluntarily apply for an SOA to claim deductions not covered by the withholding tax flat rate. Reviewing your tax situation early helps avoid mistakes and legally optimise your tax burden.