Hello, could you please help me with the question whether the Severance pay will be taxed in Switzerland in case someone is a resident in another country at the time of the severance payment? The employment contract related to this severance pay was in Switzerland.
In principle it would be taxed wherever the person is doing their tax return for the year. If you’ve changed tax residency within the year such that you’re doing a partial return in both countries then I think (a guess) that you’d break down all income including severance pay by the date at which the payment was made.
So if you’ve already changed tax residency by that time then (again, I think) it would be taxed in the new country, not in Switzerland.
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I don’t know the definite answer here but I remember a case where a bonus payment paid from a Swiss company to an employee who had by then already left Switzerland was taxed at source in Switzerland. To me this sounds like a similar issue.
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Normally would be taxed in both: withholding tax at source in Switzerland and taxed as income in the country of residence - perhaps with some credit/offset if there is a double tax treaty in place.
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Withholding tax is not the norm though, is it? Isn’t that done only for those people who don’t file an annual tax return?
Do you actually know anything here or are you just winging it?
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