Withholding tax

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The withholding tax in Switzerland is one of the federal government in addition to the withholding tax levied on the income of capital assets (especially on interest and dividends ), to Swiss lottery winnings and on certain insurance benefits. It is a form of income tax . The main purpose of the tax is to curb tax evasion ; taxpayers should be prompted to report to the authorities responsible for direct taxes the income and investment income charged with withholding tax as well as the assets from which the taxable profits were obtained.

It cannot be credited or partially reimbursed by tax non-residents via the German income tax return, but is reimbursed by Switzerland under certain conditions.

For taxpayers resident in Switzerland, the withholding tax is refunded under certain conditions by offsetting against income tax or in cash. If the taxpayer complies with his declaration obligation, he will not be finally charged by the tax.

The federal government generated CHF 4,723 million in income from withholding tax in 2010, which corresponded to 7.5% of the total budget.

history

Withholding tax was introduced in January 1944 at a tax rate of 15%; since 1976 the rate for most transactions has been 35%.

application

Withholding tax is a tax on the payee; However, it is retained by the payer and transferred to the Federal Tax Administration . The recipient receives a tax deduction certificate from the payer. If the recipient now states his received payment in the tax return, he will receive the withheld tax offset against his tax liability and a tax overpaid will be reimbursed. Withholding tax is usually higher than income tax, so a declaration of the interest income leads to a refund in most cases.

For example, a bank is obliged to withhold a tax of 35% on interest payments and pay it to the tax administration.

Example: withholding tax on interest
Account balance CHF 200,000
Annual interest rate 1.0% CHF 2,000
Withholding tax 35% CHF 700

The account holder only receives CHF 1,300.00 in interest from the bank. The bank pays the withholding tax of CHF 700.00 to the state.

If the recipient is not based in Switzerland but in another country, the following options are available:

  • Switzerland has concluded a double taxation agreement with the state and the agreement provides that Switzerland can levy no or only a lower withholding tax. The withholding tax can then be reduced to the rate specified in the agreement when it is paid out or the excess tax paid can be reclaimed by the Swiss tax administration. A tax that has been withheld in accordance with the agreement can possibly be offset against the recipient's domestic tax.
  • There is no double taxation agreement. In this case, the tax burden in Switzerland is final. The tax or part of it may possibly be offset against the tax liability in the recipient's home country.

The withholding tax is a self- assessment tax . This means that the payer has to register and calculate the tax himself.

Income from movable capital assets

Subject to tax

In particular, the following are excluded from withholding tax:

  • Interest on customer balances if the interest amount for a calendar year does not exceed CHF 200 and the interest is credited once a year
  • Interest from a 3rd pillar account

For dividends and other benefits among affiliated companies within Switzerland, the payment can be replaced by a notification. The same procedure can be used by companies from the European Union , the other countries of the European Economic Area and from countries with which there is a double taxation agreement that does not provide for withholding tax.

Other cases

Swiss lottery winnings over CHF 1,000,000 are subject to withholding tax of 35%.

A tax of 15 % is withheld for annuities and pensions and 8% is withheld for other insurance benefits, especially for lump-sum payments from life insurance .

Circumvention and evasion

Since withholding tax can become the final tax burden for non-residents, attempts are made to avoid or reduce this burden through various legal structures. Such a structure can be so-called securities lending and repo transactions. To this end, the Federal Tax Administration has issued a special administrative instruction to prevent the unjustified use of tax advantages.

If you do not declare income that is subject to withholding tax in your tax return, this is considered tax evasion and is punishable under the Federal Act on Direct Federal Taxes (DBG). The fine is usually the single amount of the tax evaded.

Withholding tax in relation to Germany

Withholding tax is limited by the double taxation agreement between Switzerland and Germany. Therefore, it affects a person who is resident in Germany as follows:

Type of payment receiver impact
Interest and Similar Benefits natural person or legal person Withholding tax: 0%
Dividends natural person Withholding tax: 15%
Dividends legal person Withholding tax: 0 - 15%
Income from participation certificates and the like natural person or legal person Withholding tax: 30%
Lottery winnings, insurance benefits natural or legal person Withholding tax: 0%
Annuities, pensions natural or legal person Withholding tax: 0%

The difference between the maximum tax rate under the Agreement and the rate under the Withholding Tax Act can be reclaimed in Switzerland. In Germany, the maximum amount that can be credited is the maximum amount of tax that can be withheld under the agreement.

Web links

Individual evidence

  1. ^ Uli Reitz: Interest from Switzerland September 8, 2014.
  2. ↑ Federal Finance Administration, Pocket Statistics on Public Finances 2011 (PDF, 1551 KB)  ( Page no longer available , search in web archives )  Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice.@1@ 2Template: Dead Link / www.bfs.admin.ch  
  3. ↑ cf. For example, the agreement between the Swiss Confederation and the Federal Republic of Germany to avoid double taxation in the area of ​​taxes on income and assets as of December 28, 2016, accessed on August 21, 2020.
  4. ↑ The German-Swiss double taxation agreement network of information and advice centers for cross-border issues on the Upper Rhine, accessed on August 21, 2020.
  5. ↑ Art. 5 Withholding Tax Act
  6. ↑ Art. 20 Withholding Tax Act
  7. ^ Federal Tax Administration FTA, Circular No. 13, September 1, 2006 . Cantonal tax administration of Basel-Landschaft. Retrieved March 10, 2013.
  8. ↑ Art. 11 Double Taxation Agreement between Switzerland and Germany
  9. ↑ Art. 10 double taxation agreement between Switzerland and Germany
  10. ↑ Art. 10 double taxation agreement between Switzerland and Germany
  11. ↑ Art. 10 double taxation agreement between Switzerland and Germany
  12. ↑ Art. 21 Double Taxation Agreement between Switzerland and Germany
  13. ↑ Art. 18 Double Taxation Agreement between Switzerland and Germany