Do I have to pay tax on dividends in Switzerland? We provide the most important facts about taxes on dividends and instructions on how to reclaim withholding taxes.
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Do I have to pay tax on dividends in Switzerland?
In Switzerland, you must pay tax on capital gains as income. This includes dividends in particular, but also interest on bonds, savings accounts, etc. There are a few exceptions – we will discuss tax-free dividends below.
You may have already noticed this: When the dividend is paid out, you do not receive the entire amount distributed. Part of the dividend is withheld at source (i.e. from your fund, ETF, or share).
How large the withheld portion is and how much you can reclaim depends on the domicile of your investment. Let’s take a closer look at what applies to Swiss shares and foreign shares.
Withholding tax in Switzerland explained
If you own Swiss shares, withholding tax is payable on dividends. The withholding tax rate is 35% of the dividend. You can reclaim this 35% in full via your tax return.
Taxation of dividends from shares domiciled abroad
If you have shares in foreign companies, withholding tax is payable on dividends. The amount of withholding tax depends on the country in question.
Withholding tax is made up of a reclaimable and a non-reclaimable portion:
- The reclaimable portion can be reclaimed from the source country. How much can be reclaimed depends on the double taxation agreement between Switzerland and the country in question.
- The non-recoverable portion can often be offset against your income tax via the flat-rate tax credit.
Exception: tax-free dividends in pillar 3a
You do not have to declare pension assets in your tax return. This is why dividends and interest from pillar 3a are also tax-free. They are not counted as income – unlike dividends and interest from private assets. You can find out how much you can save as a result in the article on tax savings from pillar 3a.
Exception: Tax-free dividends from capital contribution reserves
Dividends are considered income and are generally taxable. Nevertheless, annual reports often refer to “tax-free dividends”.
The reason: dividends normally come from retained earnings. However, companies can also utilize capital contribution reserves for dividend payments. Capital contribution reserves are created when investors pay more than the nominal value of a share in a capital increase. As this capital belongs to the shareholders, the repayment is tax-free for most private investors in Switzerland.
Since the 2008 corporate tax reform, such distributions are not only exempt from income tax but also from withholding tax. “Tax-free dividends” are therefore actually tax-free repayments from capital contribution reserves.
Taxes on dividends: Excursus fund domicile
If you invest in a fund or ETF, the situation is somewhat different. In this case, the amount of withholding tax depends not only on the domicile of the company but also on the fund domicile.
For example, a fund with US shares domiciled in Ireland will only charge you a 15% withholding tax. A fund with US shares domiciled in Luxembourg must withhold 30% withholding tax.
The reason for the different taxation depending on the fund domicile is double taxation agreements. As Ireland has an old double taxation agreement with the USA, the fund can reclaim 15% of the withholding tax directly.
Important: It does not matter whether it is an accumulating or distributing fund. Dividends must be taxed for both.
How can I reclaim the withholding tax?
In Switzerland, you can reclaim the withholding tax as follows: Enter the interest and dividends in the list of securities on your tax return.
To do this, you must record each individual investment with the number of units and the date of purchase or sale. With this information, the tax software or online tax return automatically records the value of the investment and any income. If you declare your investments correctly, the withholding tax will be offset against your tax liability or refunded.
An e-tax statement makes this work much easier for you, as you no longer have to enter the individual items manually. With the e-tax statement, the data is entered automatically.
Reclaim withholding tax: Instructions for the finpension investment solution
At the beginning of the year, you will receive an e-tax statement from finpension under Documents / Tax certificates. Select your canton of residence and download the document.
Now import the document into the tax software of your canton of residence. Or upload the e-tax statement to your online tax return. This allows you to submit the necessary data for reclaiming the withholding tax. You don’t have to fill in anything else, the data is automatically entered in the right place.
Good to know: The e-tax statement from finpension is free of charge.
How can I get the withholding tax back?
How you can reclaim the withholding tax as a Swiss investor depends on the source country and is often complicated. There are two ways:
- Reclaimable part: You must complete the refund form of the source state. The forms can be found on the website of the Federal Tax Administration. Some providers support their very wealthy clients with this or take on this task completely.
- Non-recoverable portion: Fill in form DA-1 for the flat-rate tax credit. For this to be possible, the non-recoverable taxes must amount to at least CHF 100. The claim must be made within 3 years.
Flat-rate tax credit for US dividends with finpension
finpension has developed a new type of reporting for the lump-sum tax accounting of US dividends. With this reporting, you can now reclaim more withholding tax on US dividends than ever before. All important details can be found in the linked article.
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