Withholding tax

The withholding tax is a tax levied by the federal government on the yield of movable capital assets. The aim of the tax is to curb tax evasion.

Withholding Tax: What is it?

The withholding tax is a tax collected at the source. For taxpayers residing in Switzerland, the withholding tax does not lead to a burden as long as they comply with their declaration obligations. The withholding tax is levied on income from movable capital assets, Swiss lottery winnings, and certain insurance benefits. Interest income up to an amount of CHF 200 is exempt from the tax on all customer deposits, but only if only one statement is made per calendar year. Likewise, lottery winnings up to an amount of CHF 1000 are now exempt from withholding tax.

Since the tax is refunded to individuals in Switzerland, it primarily serves to prevent tax evasion. It is a so-called security tax domestically. This creates an incentive to declare all assets and income parts in the context of the tax return. The rate of withholding tax is 35% on capital gains and lottery winnings, 15% on life annuities and pensions, and 8% on insurance benefits in capital form. The tax is not collected from the recipient but directly from the debtor of the taxable service. This is the distributing corporation in the case of a dividend payout and the bank concerned in the case of interest payment to customers.

Refund of Withholding Tax

Natural persons must submit their application for the refund of the withholding tax to their canton of residence. Legal entities as well as limited partnerships and general partnerships apply for their refund directly and exclusively at the federal tax administration. The claim for refund must be substantiated, which is usually done with a securities directory. It can be made at the earliest after the end of the calendar year, but must be made no later than three years afterwards, after which the claim for refund is generally forfeited.