Withholding tax is a security tax which enables the tax authority to ensure that certain transactions have been correctly declared and subjected to tax.

It is a form of tax withheld at the source at a Confederation level which applies to investment income, lottery winnings, pensions and annuities and other insurances. Under certain conditions, Withholding tax may be refunded to taxpayers who are residents in Switzerland. This is generally achieved through compensation within the framework of the tax return.

Withholding tax procedure

The debtor of the taxable benefit required to pay the Withholding tax must deduct this Withholding tax amount from the total amount he/she must pay to the creditor. It is thus the creditor of the taxable benefit who covers the tax burden. The debtor then pays the Withholding tax to the FTA within 30 days following the origination of tax liability. Under certain conditions, the taxpayer (the creditor) may request the refund of this payment.

Depending on whether the taxpayer in question is a natural or a legal person, the refund will be handled by the cantonal tax authority or the FTA respectively.

In accordance with Article 13 of the Loi fédérale sur l’impôt anticipé (LIA), tax rates differ depending on the type of product:

  • 35% for investment income (dividends, interest from bonds, client assets with banks, etc.) and for lottery winnings
  • 15% for pensions and annuities
  • 8% for other insurances

Example:

Mr X has an account at a bank. In 2017, the interest amounted to CHF 5000.00. The bank only repays 65% of this amount to him, that is to say CHF 3250.00. The remaining CHF 1750.00 (35%) are paid to the FTA by the bank. In order to retrieve his CHF 1750.00, the taxpayer will have to have correctly declared his income, including the savings account and the CHF 5000.00 of interest. The refund will be handled by subtracting this amount from the amount of cantonal tax due (or in cash if the taxpayer is tax-exempt).


Who can request the refund of Withholding tax?

Not all Swiss taxpayers may request the refund of Withholding tax. The following conditions must be met in order to qualify:

  • The taxpayer must be a natural person domiciled in Switzerland whose tax obligations are in order

OR

  • A legal person with registered offices in Switzerland whose tax obligations are in order

Foreign companies based in countries which have not signed a convention on double-taxation with Switzerland do not have the right to request the refund of Withholding tax. The amount due thus represents a final tax burden.

In order to receive a refund of Withholding tax, the natural person must file a refund request along with his/her tax declaration in the canton in which he/she was resident at the end of the calendar year for which the taxable benefit was paid.

For legal personsthe request is to be submitted to the FTA using an official form. In principle, the refund request must be filed at the end of the calendar year in which the Withholding tax concerned by the request was paid at the earliest. At the latest, the request must be submitted in the three following years.

For further information regarding Withholding tax and the related tax and administrative procedures, contact our tax and legal advisors. They will examine your file and offer you recommendations. They can also take care of all of these procedures on your behalf.

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