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Swiss Federal Council recommends changes to withholding tax reform

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The reforms aim at increasing competitiveness of the capital markets

Brandi Caruso and Robin King of Deloitte Switzerland examine the Swiss Federal Council’s consultation draft regarding the Swiss withholding tax reform and the abolishment of Swiss securities transfer tax on debt instruments.

On April 3 2020, the Swiss Federal Council released a proposed set of amendments to the Swiss withholding tax and securities transfer tax regimes. The reform primarily aims at strengthening the Swiss debt capital market and increasing tax honesty of Swiss resident individual investors.

The consultation period runs until July 10 2020 and the rules will become effective as early as 2023.

The key parameters of the proposed reform are:

  • Introduction of a paying agent system; 

  • Abolition of the withholding tax on interest paid to Swiss corporate and all foreign investors;

  • Harmonisation of the rules for direct and indirect investments, i.e. through collective investment vehicles and structured products;

  • Clarification regarding substitute interest/dividends payments; and

  • Abolition of the securities transfer tax on debt instruments.


As anticipated, the Federal Council has not included in this reform any amendments to the issue of stamp duty or corporate income tax. Further, it has also refrained from changing the withholding tax regime in relation to dividends.

Paying agent system

The basic principle of the new paying agent system is simple. Instead of the debtor, the Swiss paying agent closest to the recipient will deduct the withholding tax on Swiss and now also foreign source interest payments made to Swiss resident individual investors. On the other hand, interest payments to Swiss corporate and all foreign investors will be exempt from the Swiss withholding tax, which should stimulate the Swiss debt capital market.

The consultation draft addresses various operational aspects of the paying agent system while others will need to be clarified in the ordinance or other guidance.

Indirect investments and substitute payments

The Federal Council also proposes to expand the Swiss withholding tax regime to:

  • All types of Swiss collective investment schemes (instead of only those subject to the Collective Investment Schemes Act);

  • Foreign collective investment schemes as well as structured products from Swiss and foreign issuers; and

  • Certain substitute dividend/interest payments.


The latter two categories are only in scope to the extent covered by the paying agent system.

Deloitte view

Overall, the planned reform presented by the Federal Council definitely has the potential to increase the competitiveness of the Swiss debt capital market. Due to the abolition of the withholding tax on interest paid to Swiss corporate and all foreign investors as well as abolition of the securities transfer tax for debt instruments, it will be more attractive for Swiss corporates to issue bonds and perform group financing activities (e.g. treasury and cash pooling functions) out of Switzerland. 

The foundations of the paying agent system outlined in the consultation draft seek to provide for a typical Swiss compromise between the interests of the various stakeholders. From a paying agent perspective, there are welcome practical solutions and measures limiting the operational burden and risks. Nevertheless, we believe that some fixes and further clarifications are still needed with respect to indirect investment and substitute payments, which admittedly form the most complex part of this legislative project.



Brandi Caruso

T: +41 58 279 6397

E: bcaruso@deloitte.ch



Robin King

T: +41 58 279 7086

E: robinking@deloitte.ch



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