Withholding tax

Withholding tax on dividends, refunds and restructuring in Switzerland

Swiss withholding tax is levied at a rate of 35% on certain income paid by Swiss entities, in particular dividend distributions. The rules governing withholding tax are strict and closely monitored by the Swiss tax authorities, making errors potentially costly for companies and shareholders.

RSM Switzerland supports companies with all aspects of Swiss withholding tax, from declaration and payment to refund procedures and structuring advice.

Scope of Swiss withholding tax

Swiss withholding tax is levied in particular when a Swiss company:

distributes dividends to its shareholders;
pays interest on bonds;
pays returns on units of collective investment schemes issued in Switzerland;
pays interest on certain Swiss bank accounts.

The tax is generally withheld at source at a rate of 35% and remitted to the Swiss Federal Tax Administration.

Refund of Swiss withholding tax

Withholding tax is not final in most cases. The income subject to withholding tax is usually included in the taxpayer’s regular tax return, allowing recovery of the withheld amount.

Swiss resident taxpayers generally obtain a full refund through the ordinary tax filing process.
Foreign taxpayers may obtain a full or partial refund based on the applicable double taxation treaty between Switzerland and their country of residence.

The refund process may become complex where investments are held through multi tier structures, such as trusts, partnerships, foundations or investment funds with multiple legal vehicles.

Declaration and payment deadlines

30 day payment rule

Swiss companies must declare and pay the withholding tax within 30 days from the date the taxable income becomes due.

In practice, the tax authorities generally refer to the dividend payment date as approved in the minutes of the general meeting. If no specific payment date is mentioned, the Swiss Federal Tax Administration considers the dividend to be immediately due.

Hidden dividends and withholding tax risks

What are hidden dividends

Hidden (or concealed) dividends arise when a company grants an identifiable benefit to a shareholder—or a related person—without adequate consideration. These benefits may take various forms, including:

excessive remuneration or payments;
interest rates that are not at arm’s length;
transfer prices that do not reflect market conditions;
indirect benefits or advantages.

Withholding tax consequences

Hidden dividends remain subject to Swiss withholding tax and must be declared accordingly. Determining the due date may be complex, particularly where benefits arise over time or through recurring arrangements.

The Swiss Federal Tax Administration regularly performs limiting spot checks—typically every five years to ensure that dividend distributions, including hidden dividends, have been correctly declared.

Declaration procedure instead of payment

In specific situations, Swiss law allows the use of a declaration procedure instead of immediate payment of withholding tax. This applies in particular:

for qualifying dividend distributions within Swiss corporate groups;
in certain international situations;
in the context of reorganisations or audits.

The application of the declaration procedure is subject to strict conditions and generally requires careful documentation.

Withholding tax and restructuring

Withholding tax implications are often critical in the context of corporate restructuring. Transfers of assets at book value, intra group reorganisations or dividend flows may trigger withholding tax exposure if not properly structured.

In practice, Swiss restructurings almost always require an advance ruling with the tax authorities in order to secure tax neutrality for both withholding tax and corporate income tax purposes.