Withholding Tax - Part 1: What is it?

The withholding tax helps to curb tax evasion in Switzerland. To achieve this goal, it uses a simple consideration, which has been somewhat complicatedly designed. Therefore, Findea explains in a four-part series of articles what withholding tax is exactly and how it works in practice. This first article explains what withholding tax specifically is.

The goal of the withholding tax is to prevent tax evasion. This goal is achieved by giving people an incentive to declare all their taxable receipts and income. This tax is owed on income from movable capital assets (especially dividends, interest, and lottery winnings), on life annuities and pensions, and on certain other insurance benefits. Withholding tax is a type of source tax. This means that it is not the recipient of the money who pays the tax, but the one who pays it out. The entitled party to the money receives the assessed tax back under certain conditions. To do this, however, they must disclose all their income. Thus, an incentive is created to not hide any income from the tax authorities.

This tax is a so-called object tax. It is levied regardless of the economic performance of the recipient of the service. Findea helps you keep your taxes simple and straightforward.