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

For expats in Switzerland, the residence permit plays a crucial role, not only in terms of employment and duration of stay but also for tax purposes. The most common permits for foreign employees are the B permit (residence permit) and the L permit (short-term residence permit). Both types carry different tax implications that expats should understand.

This article explains in detail how the two permits differ, what tax consequences they have, and what obligations expats must fulfill in each case.

Overview of Residence Permits in Switzerland

B Permit: Residence Permit for Longer Stays

The B permit is generally issued to foreign nationals with a long-term employment contract (at least 12 months) or an unlimited contract. It is usually valid for one year and is renewable annually.

L Permit: Short-Term Residence Permit

The L permit is intended for short-term stays, typically less than one year. It is closely tied to the duration of the employment contract and is mainly granted to expats working on project-based or temporary assignments in Switzerland.

Tax Treatment of Expats with L Permits

Withholding Tax as the Main Form of Taxation

Expats with an L permit are almost always fully subject to withholding tax. This means that the employer deducts taxes directly from the salary and pays them to the tax authorities.

No Ordinary Tax Return Required

Since the stay is temporary and expats typically do not have assets in Switzerland, holders of an L permit usually do not need to file a separate tax return. The withholding tax covers the tax liability.

Practical Examples

• An engineer from Spain comes to Geneva for a six-month project. He receives an L permit, and all his income is subject to withholding tax.
• A consultant from India works in Zurich for nine months. She is also subject to withholding tax, with no additional tax return required.

Tax Treatment of Expats with B Permits

Withholding Tax with Exceptions

Even B permit holders are initially taxed via withholding tax, provided they do not have a C permit (settlement permit). The withholding tax generally covers employment income.

Ordinary Assessment Under Certain Conditions

Unlike the L permit, the B permit has an important exception: if annual income exceeds CHF 120,000, or if there is additional income from assets, shares, or real estate, a subsequent ordinary assessment may be required. A full tax return must then be submitted, with withholding tax credited against the total liability.

Long-Term Perspective

Since the B permit is renewed annually and signals a longer stay, expats with a B permit are more likely to have additional tax obligations, such as declaring assets in Switzerland or real estate abroad.

Connection to Social Security

AHV/IV/EO Contributions

Both L and B permit holders must pay contributions to Swiss social insurance schemes: old-age and survivors’ insurance (AHV), disability insurance (IV), and income compensation for military service (EO). Contributions are deducted from the salary.

Unemployment Insurance

Both groups are subject to unemployment insurance contributions. However, expats with a B permit may benefit more, as their longer stay often meets eligibility criteria for benefits.

Health Insurance

All expats must take out health insurance within three months of arrival, regardless of permit type. Moving to another canton triggers a special cancellation right.

Detailed Tax Differences Between B and L Permits

Filing Obligations

• L permit: No ordinary tax return required; only withholding tax applies.
• B permit: Withholding tax applies, but a subsequent ordinary assessment may be required.

Long-Term Tax Liability

• L permit: Tax obligations typically end with the project or upon leaving Switzerland.
• B permit: Longer-term residence leads to broader tax obligations, particularly for worldwide income and assets.

Double Taxation Agreements

• B permit holders more often benefit from DTAs due to longer residence and cross-border income.
• L permit holders generally have a minor need for DTA considerations.

Special Situations for Expats

Cross-Border Workers

Expats with L or B permits who live abroad but work in Switzerland are subject to special cross-border regulations, depending on their country of residence (e.g., Germany, France, or Italy).

Spouse and Family

Married expats with children may have tariff adjustments. These are more relevant for B permit holders, who more frequently undergo ordinary assessment.

Foreign Assets

B permit holders with a longer stay must declare foreign assets in Switzerland, whereas this is usually irrelevant for L permit holders.

Common Mistakes and Tips

Common Mistakes

• Assuming B permit holders are only subject to withholding tax, ignoring ordinary assessment when income exceeds CHF 120,000
• Failing to report marital status or dependents, resulting in incorrect withholding tax rates
• Overlooking reporting obligations when changing residence or employer

Practical Tips

• Carefully check the type of residence permit, as it determines tax obligations
• Prepare documents early for a subsequent ordinary assessment if staying long-term
• Consider DTAs when holding international income or assets
• Seek professional tax advice, especially in complex situations

Conclusion

The differences between B and L permits are significant for expats in terms of taxation. While the L permit typically entails only withholding tax and is relatively simple, the B permit leads to broader obligations, especially for higher income or additional assets.

Expats who understand these differences can plan ahead, avoid mistakes, and optimize their tax burden, making their stay in Switzerland more tax-transparent and manageable.