The Swiss tax authorities levy a 35% withholding tax when a Swiss company pays a dividend to its shareholders, pays interest on a bond and pays returns on units of a collective investment issued by a person in Switzerland, or on interest on certain bank accounts.
This tax is not final as the income is usually included in the taxpayer's regular tax return, and the taxpayer then obtains a refund of the withholding tax. For foreign taxpayers, the refund of the withholding tax is based on the double taxation agreements with Switzerland. There are a number of different forms that allow each taxpayer to apply for a refund of the withholding tax. The refund procedure can be quite complex in case of investments held through multi-stage investment funds with various legal structures (trusts, LLC, LLP, LP, foundations, etc.).
Deadline for payment
It is important for Swiss companies to declare and pay the withholding tax within 30 days after the due date of the returns. In practice, the tax authorities refer to the agreed payment date of the dividend according to the minutes of the general meeting. In the absence of such a payment date, the Federal Tax Administration considers the dividend to be immediately due. The withholding tax must therefore be paid and declared within 30 days after the date of the general meeting.
In this context, it is important to remember the existence of hidden dividends. Concealed dividends are additional and identifiable benefits that a company grants to its shareholders, or any other person close to it, without corresponding consideration. They can be gifts in various forms, such as a payment or gratuity. It may also simply be an excessively favorable interest rate on a debt or receivable between the company and its shareholder, or transfer prices that do not reflect market prices.
In the case of concealed dividends, the obligation to pay withholding tax remains and the declaration of the dividend is crucial. The due date is less clear, especially in the case of concealed benefits that recur over time or whose realization is not always easy to define, such as simulated loans to shareholders.
It is good to know that the Federal Tax Administration carries out spot checks, generally every 5 years, to ensure that all dividends, especially hidden dividends, have been correctly declared.
It should be noted that in a limited number of cases, it is possible to use a declaration procedure instead of a withholding tax payment procedure, in particular in international relations, between Swiss companies and during audits.
Withholding tax and restructuring
Withholding tax issues are also central to a group restructuring where transfers can be made at book value of the assets. The stakes are then of paramount importance! This is why the restructuring of a Swiss company generally requires a ruling with the tax authorities in order to guarantee the neutrality of the operation in terms of withholding tax and income tax.