Withholding tax refund for non-residents

When a Swiss company distributes dividends, it withholds the 35% Swiss withholding tax (imposta preventiva) at source and pays it to the Confederation. For someone resident in Switzerland it is a simple advance payment, recoverable through the tax return. For a non-resident shareholder, however, that 35% risks becoming a definitive cost if the right procedures are not activated. Let’s look at how the refund works and why planning matters.

Why withholding tax exists

The withholding tax is a security tax: it serves to push taxpayers to declare their income from capital. It hits at source, at a rate of 35%, on dividends, interest on bonds and certain other income from movable assets. The Swiss resident who correctly declares the dividend has it refunded or credited; those who do not declare it lose it. For the non-resident the mechanism is different, because they do not file an ordinary Swiss tax return.

The key: double taxation treaties

The non-resident recovers the tax thanks to the double taxation treaties (DTTs) that Switzerland has concluded with a great many countries. These treaties set a residual rate that Switzerland may withhold definitively, as a rule lower than 35%. The difference between the 35% withheld and the residual rate provided by the treaty is refundable.

Typical residual rates on dividends are, depending on the treaty and the situation:

An ordinary rate for portfolios and minority participations (often around 15%).
A reduced or zero rate for qualifying corporate participations (above a certain participation threshold and subject to anti-abuse conditions).

The refund is therefore equal to 35% minus the treaty rate. Under the treaty between Switzerland and Italy, for example, an individual shareholder resident in Italy generally recovers the part exceeding the residual rate provided by the treaty; the detail should always be checked against the current text.

How to claim the refund

The refund is not automatic: it must be requested from the Federal Tax Administration using the specific form provided for the beneficiary’s country of residence. Recurring elements of the procedure:

An official form specific to each country, often to be stamped or accompanied by a certificate of tax residence issued by the foreign authority.
Proof of the withholding made (dividend statement, attestation from the company or the bank).
Compliance with a deadline: the claim must be filed within a few years of the payment falling due (generally three years), after which the right to the refund lapses.

For qualifying participations there are also notification procedures that, under certain conditions, allow the 35% advance to be avoided altogether by applying the reduced rate directly.

Mistakes that cause the refund to be lost

Letting the deadline expire: it is the most frequent cause of loss of the right.
Submitting the wrong form or without the certificate of residence.
Forgetting the anti-abuse clauses: if the structure lacks substance and serves only to capture treaty benefits, the refund can be denied.
Not keeping the dividend statements that prove the withholding.

In summary

Switzerland withholds 35% on dividends, including those paid to foreign shareholders.
The double taxation treaties set a lower residual rate.
The refund is the difference between the 35% and the treaty rate.
A formal claim is required, with a certificate of residence, within the applicable deadline.
Economic substance is decisive in order not to fall foul of the anti-abuse clauses.

How we help you

We assist non-resident shareholders in claiming the refund of the withholding tax, we check the applicable treaty rate and we prepare forms and certificates within the deadlines, preventing the 35% from becoming a definitive cost. Recover your withholding tax.