Switzerland

This section shall provide a general overview and an indication of the residual WHT on outbound payments from Switzerland. There might be certain exceptions or further reductions available in the DTT, which, for the sake of clarity, are not reflected in the table below. Accordingly, the table below does not replace a thorough assessment of a specific case based on the applicable DTT in force.

The statutory rate of Swiss WHT is 35%. Relief, if any, is generally granted by refund. With respect to dividends between qualifying related companies, a mere notification/reporting procedure may be requested for the fraction of the Swiss WHT exceeding the residual WHT (which is 0% in many cases). Starting 1 January 2023, newly issued notification certificates are valid for five years (instead of three years through the end of 2022). The table further below shows the residual/remaining tax for the recipient. Credit for the unrelieved portion of Swiss WHT may be available in the country of the recipient.

In Switzerland, there is no WHT on interest deriving from regular loan agreements. Swiss WHT of 35% is only levied on interest paid by banking institutions (or paid by entities tax-wise qualified as 'banking institutions') to non-banks, interest on bonds, and interest on bond-like loans. The residual rates in the table below show the standard treaty rates and do not reflect further reliefs available in certain DTTs (e.g. on traded bonds or other traded securities).

Many of the DTTs concluded between Switzerland and other jurisdictions contain a full relief if dividends or interest is paid to governments (including political subdivisions and other governmental institutions), central banks, or pension funds.

Note that in the DTTs concluded between Switzerland and other jurisdictions, the reduced WHT for substantial holdings usually is only available if the recipient of the dividend is a corporate body (e.g. not taxed as a partnership).

Interest paid on contingent convertible bonds (CoCos) and on write-off bonds (bonds with claim waiver) of systematically important banks is exempt from Swiss WHT. The WHT exemption is restricted to bonds issued by the respective institutions between 2013 and 2026. Additionally, interest of certain bail-in bonds issued by the respective institutions between 2017 and 2026 is not subject to WHT. These bonds must, furthermore, fulfil specific criteria in order to benefit from the WHT exemption.

Capital contribution principle

The capital contribution principle allows the repayment of qualifying shareholders’ capital contributions without deduction of Swiss WHT at the level of the distributing company and without income tax implications at the level of Swiss individual shareholders (holding the shares as private wealth). In general, the capital contribution principle applies for premiums, additional paid-in capital, and contributions into the reserves of a company without increasing the nominal share capital.

It should be noted that since 1 January 2020 there have been restrictions to the amount that a company listed at the Swiss stock exchange may distribute as capital contribution reserves. There are no restrictions for any other companies.

Treaties in force (as of 6 December 2023)

* Switzerland and the European Union (EU) signed an Agreement regarding the Introduction of the Global Automatic Exchange of Information Standard on 27 May 2015, applicable as of 1 January 2017. The Agreement signed is a protocol of amendment that replaces the Savings Agreement between Switzerland and the European Union, which has applied since 1 July 2005. Article 9 of the Automatic Exchange of Information Agreement (AEOI) provides the same benefits as the former Savings Agreement, as follows:

Upon request, Swiss WHT on dividends paid by a Swiss subsidiary company to its EU parent company may be reduced to 0% (reduction at source) and is only subject to a notification/reporting procedure, provided the following key conditions are cumulatively met:

• Direct minimum holding of 25% of the subsidiary’s capital for at least two years.
• Both companies are subject to CIT.

Upon request, WHT on interest and royalty payments made between associated companies or their PE resident, respectively situated in Switzerland and the European Union, may be reduced to 0% (reduction at source) in the source state, provided the following key conditions are cumulatively met:

• Direct minimum holding of 25% for at least two years (parent/subsidiary) or direct holding by a third company of minimum 25% in the capital of both companies for at least two years (sister companies).
• Both companies are subject to CIT.

The application of the Bilateral Agreement is subject to foreign and Swiss misuse conditions.

** Upon exit of the United Kingdom from the European Union on 31 January 2020, a transition period running until 31 December 2020 applied during which bilateral agreements between Switzerland and the European Union, including the AEOI between Switzerland and the European Union, continued to apply to the United Kingdom. After this transition period, the AEOI is no longer applicable to the United Kingdom as the treaty with the European Union no longer applies to the United Kingdom. It is worth noting that the treaty with the European Union also applied to Gibraltar as a European territory for whose external relations a member state is responsible. Being that this member state is the United Kingdom, with the exit of the United Kingdom from the European Union, the AEOI no longer applies to Gibraltar either.

DTTs between Switzerland and EU countries with more favourable tax treatment of dividend, interest, and royalty payments remain unaffected.

Notes

1. There is no Swiss WHT on royalties, licences, and similar fees payable by Swiss individuals or corporations (provided that the dealing at arm’s-length principle is met).
2. The statutory Swiss WHT rate of 35% is levied but refunded, provided that the respective earnings are declared as income for tax purposes.
3. Between Swiss group companies, Swiss WHT of 35% is usually fully refundable. Furthermore, in many cases, the tax liability can be met by the notification/reporting procedure. For this purpose, a direct investment of at least 20% in the share capital of the payer of the dividend is required.
4. 20% minimal shareholding plus foreign investment of at least 200,000 United States dollars (USD).
5. Only applicable if holding period is at least 12 months.
6. 15% residual tax for companies with more than 10% shareholding if the company receiving the dividend is directly or indirectly controlled by a shareholder not resident in the European Union or Switzerland and cannot prove that the company is not set up only to benefit from the 0% WHT on dividends.
7. Since 30 November 2022, 0% WHT if minimum shareholding is at least 10% for at least one year.
8. 5% WHT if the shareholding of 10% was held less than two years; 0% WHT if the shareholding of 10% was held longer than two years.
9. Only applicable if holding period is at least 24 months.
10. 5% WHT if dividend recipient is a corporate body; 10% WHT if dividend recipient is an individual.
11. 20% minimal shareholding plus foreign investment of at least CHF 200,000.
12. 10% WHT for shareholdings between 25% and 50%; 7% WHT for shareholdings of at least 50%.
13. Full relief if paid to a related entity in the form of a corporation.
14. Since 30 November 2022, 0% WHT if minimum shareholding is at least 10% for at least one year.
15. Switzerland levies a WHT on interest paid on bonds issued in Switzerland and on bank accounts with Swiss banks. Generally, no WHT is levied on interest paid on loans. However, from a Swiss WHT perspective, a loan may be requalified as a bond under certain circumstances.
16. Application of the DTT between Switzerland and the United Kingdom.
17. The DTT between Switzerland and Kosovo is applicable since 1 January 2019.
18. Since 1 January 2019, the residual WHT is 0% on dividends for shareholdings of at least 10% held for a period of at least one year.
19. An agreement was signed on 24 January 2019, aiming a modification of the DTT by (i) reducing the percentage of minimum shareholdings from 20% to 10% to benefit from qualifying investment and (ii) setting the residual WHT rate on interest to 5%. The date of entry in force is not yet known.
20. Dividends paid to individual pension institutions (in Switzerland, so-called pillar 3a pension funds) are exempt from WHT from 1 January 2020.
21. The DTT between Switzerland and Zambia applies since 7 June 2019.
22. 5% WHT if paid to a bank.
23. On the basis of the most favoured nation clause between Switzerland and India, the residual tax rate in the source state for dividends from qualified participations is reduced from 10% to 5%. Said amendment applies retroactively since 5 July 2018.
24. The DTT applies since 1 January 2022.
25. 10% WHT if the beneficial owner is a bank and if the loan has been granted for a duration of at least five years to finance the acquisition of equipment or investment projects.
26. The DTT concluded between Switzerland and Armenia applies as of 1 January 2024.
27. 0% WHT if minimum shareholding of 50% for one year (comprising the dividend payment date) together with an investment of CHF 2 million (or equivalent in a foreign currency) has been made in the share capital or if held by a bank or pension institution. 5% WHT if minimum shareholding of 10% for one year (comprising the dividend payment date) together with an investment of CHF 100,000 (or equivalent in a foreign currency).
28. The DTT concluded between Switzerland and Ethiopia applies as of 1 January 2024.