Withholding Tax - Part 3: How does one get their money back?

The withholding tax helps to prevent tax evasion in Switzerland. To achieve this goal, it uses a simple idea that has been somewhat complicatedly implemented. Findea therefore explains in a four-part article series what withholding tax exactly is and how it works in practice. This third article explains how recipients of the service can reclaim the withholding tax.

Article one and two explained that the withholding tax is a type of tax collected at the source. It is not paid by the recipient of the service, but by the one who distributes the service. However, the recipient has the possibility, under certain conditions, to request the refund of the withholding tax. The refund can either be done by offsetting it against the remaining tax liabilities or the amount can be paid out in cash. The refund is granted particularly in cases of:

• natural persons who have their residence in Switzerland, provided that they have properly declared the assets and the income earned therefrom in their tax declaration relevant for state and local taxes. For natural persons, the refund is carried out by the cantons. Typically, the amount is directly offset against the cantonal taxes.
• legal entities that have their headquarters in Switzerland. Here too, on the condition that they have properly declared as income the earnings burdened with withholding tax. Unlike natural persons, the refund for legal entities is directly handled by the Federal Tax Administration. This is done in cash.

The situation is different for foreign recipients of the service. They have no right to claim a refund of the withholding tax. For them, the withholding tax remains in Switzerland and is claimed by the treasury.

Findea helps you keep your taxes simple and straightforward.

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