Withholding tax on dividends in Switzerland

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Those who want to invest in shares have the opportunity to invest in almost all markets worldwide. Rarely are there investors who live in Switzerland and only invest in Swiss shares.

Of course, there are those who think they know the domestic market better just because they live in this country. This may be true, but it limits you too much.

Most are active worldwide and are therefore often subject on dividends. This withholding tax must then be declared in the tax return.

What is withholding tax on dividends?

Dividends paid out from foreign shares are subject to withholding tax.

After the dividend has been paid out, your brokerage account does not receive 100% of the dividend, but only the difference between the gross dividend and the withholding tax of the share country.

Important to know: All dividends in Switzerland are subject to income tax. As an investor, you must declare the gross dividend in your tax return.

Thanks to the double taxation agreement that Switzerland has with most countries, part of the withholding tax is refunded. However, only if the dividend has been declared correctly in the tax return.

US Share Taxes Switzerland – An Example

Mr. Müller holds shares in the US company XY and a total dividend payment of CHF 100 is made. As the US withholding tax on dividends is 30%, Mr. Müller is only credited with CHF 70.

If Mr. Müller declares the dividend correctly on his next tax return by filling out the DA-1 form or has it filled out by his tax advisor, part of the withholding tax paid in the US will be credited against Swiss income tax.

In the US, for example, 15% of the dividend (note: 15% of the dividend, not 15% of the withholding tax).

Tip: You can make life easier for yourself or your tax advisor by enclosing the receipt where the ISIN or securities number is visible. This will make it easier for the tax office to understand the situation.

If we assume that the income tax is 20%, the calculation is as follows:

  DA-1 not filled in DA-1 filled in
Withholding tax USA (direct) CHF 30.- CHF 30.-
Income tax CH CHF 20.- CHF 20.-
Credited in CH CHF 0.- CHF 15.-
Income tax after credit CHF 50.- CHF 5.-
Total tax burden CHF 50.- (50%) CHF 35.- (35%)

Theoretically, it is also possible to claim the remaining CHF 15.- directly from the American tax authorities, but this requires enormous effort.

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