The report aims to strengthen the Swiss debt capital market
and securing tax compliance. It rests on two main pillars:
- The abolishment of WHTs on interest paid to Swiss
corporate and to foreign investors; and
- he introduction of a paying agent model and expansion of
the WHT regime to include income that Swiss resident
individual investors receive from foreign investments.
The WHT regime in Switzerland currently follows the debtor
principle. This sees the Swiss payer of interest or dividends
deduct a WHT of 35%. This is then deposited with the Swiss
Federal Tax Administration, and 65% of the net amount is then
credited to the investor.
Abolishment of WHTs on interest paid to Swiss corporate and
to foreign investors
Interest paid to Swiss corporate and to foreign investors
will no longer be subject to the Swiss WHT. This measure would
make it more attractive for investors to purchase Swiss bonds
and for Swiss companies to perform cash pooling and treasury
Introduction of paying agent principle
For payments that fall under the paying agent system for a
Swiss resident individual investor, as listed below, the Swiss
paying agents (i.e. the Swiss banks), would deduct the WHT and
deposit it with the Swiss Federal Tax Administration, which in
principle is similar to how the US withholding agent regime
The following types of income fall under the paying agent
- Interest from Swiss and foreign
- Dividends from foreign stocks or similar
equity instruments; and
- Interest from domestic bank accounts.
Under the report, the following will remain subject to the
- Dividends from Swiss stocks and similar
- Domestic lottery wins; and
- Domestic insurance benefits.
Indirect investments will generally be treated as direct
investments. This means that their income will fall under the
paying agent principle, except for the share of income
allocable to dividends from Swiss stocks and similar equity
The suggestions by the expert board report addresses a
long-standing backlog of reforms, and an urgent concern of
capital market participants.
Many aspects of the proposal are undoubtedly appealing and
support the intended objective. However, the suggested reform
lacks any positive features for wealthy Swiss resident
individuals who already declare all of their investments and
Furthermore, the planned 35% WHT on foreign dividend and
interest income, coupled with liquidity implications around
year-end, would be a clear disadvantage.
Robin King and Seda Bastas