International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Switzerland edges closer to reforming withholding taxes

Sponsored by


In the course of its March 8 2019 meeting, Switzerland's Federal Council took note of an expert board's report and its recommendations for reforming Swiss withholding taxes (WHTs).

The report aims to strengthen the Swiss debt capital market and securing tax compliance. It rests on two main pillars:

  1. The abolishment of WHTs on interest paid to Swiss corporate and to foreign investors; and

  2. 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 functions domestically.

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 works.

The following types of income fall under the paying agent system:

  • Interest from Swiss and foreign bonds;

  • Dividends from foreign stocks or similar equity instruments; and

  • Interest from domestic bank accounts.

Under the report, the following will remain subject to the debtor principle:

  • Dividends from Swiss stocks and similar equity instruments;

  • 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 instruments.

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 related income.

Furthermore, the planned 35% WHT on foreign dividend and interest income, coupled with liquidity implications around year-end, would be a clear disadvantage.

more across site & bottom lb ros

More from across our site

The General Court reverses its position taken four years ago, while the UN discusses tax policy in New York.
Discussion on amount B under the first part of the OECD's two-pronged approach to international tax reform is far from over, if the latest consultation is anything go by.
Pillar two might be top of mind for many multinational companies, but the huge variations between countries’ readiness means getting ahead of the game now, argues Russell Gammon, chief solutions officer at Tax Systems.
ITR’s latest quarterly PDF is going live today, leading on the looming battle between the UN and the OECD for dominance in global tax policy.
Company tax changes are central to the German government’s plan to revive the economy, but sources say they miss the mark. Ralph Cunningham reports.
The winners of the ITR Americas Tax Awards have been announced for 2023!
There is a ‘huge demand’ for tax services in the Middle East, says new Clyde & Co partner Rachel Fox in an interview with ITR.
The ECB warns the tax could leave banks with weaker capital levels, while the UAE publishes guidance on its new corporate tax regime.
Caroline Setliffe and Ben Shem-Tov of Eversheds Sutherland give an overview of the US transfer pricing penalty regime and UK diverted profits tax considerations for multinational companies.
The result follows what EY said was one of the most successful years in the firm’s history.