Swiss withholding tax
The Swiss withholding tax rate is 35% and is imposed on all types of income:
- bonds (registered or bearer)
- shares and stocks, redeemed shares or holding certificates. In summary, it is important to keep in mind that any payments to any owners of the company which are not capital repayments are subject to the withholding tax. Swiss withholding tax applies to all dividends, any kind of bonus, distribution of bonus shares and also liquidation bonuses. Moving headquarters of a Swiss company abroad for tax purposes is essentially the equivalent to a liquidation and is taxed as such. The withholding tax applies to all hidden reserves and retained earnings.
- income from a collective investment of capital fund
- balances with banks
The tax liability is on the debtor's income (i.e. it is for the entity which pays the income to pay the corresponding withholding tax). For liquidations, the law states that the person chosen to carry out the liquidation is jointly responsible for the payment of the withholding tax.
When a Swiss company pays out a dividend to a foreign company who owns a large portion (usually more than 20% depending on the Swiss tax treaty) of the capital of the Swiss company, the foreign company can request the Federal Tax Administration (AFC) to directly apply the reduced withholding tax rate according to the Swiss tax treaty instead of the normal rate of 35%.
As a general rule, Swiss residents (natural persons or corporations) who declare their income for which the withholding tax has been paid, are entitled to a refund of the withholding tax (or the allocation of refund monies to other taxes due). It is important to add that natural persons must make a request to the canton tax authorities, and companies must lodge their request with the AFC.
Foreign residents (natural persons or corporations) from a country with which Switzerland has a tax treaty can reduce withholding tax. This type of Swiss tax treaty is designed to prevent double taxation, can obtain their refund, partially or in full, from the withholding tax. They must contact the AFC.