Withholding Tax

Withholding tax in Switzerland is a special type of income tax that is deducted directly at the source (i.e., by the payer) and paid to the tax office.

It serves as a simplified procedure for taxing individuals who do not yet have full tax-legal status in Switzerland.

Who is subject to withholding tax?

Withholding tax mainly affects:

1. Foreign employees residing in Switzerland:

• Persons who live and work in Switzerland but do not have a settlement permit (C permit).
• Exception: Persons whose spouse has a C permit or Swiss passport are generally subject to ordinary taxation.

2. Persons without tax-legal residence in Switzerland:

For example, cross-border commuters, weekly residents, artists, athletes, or board members who earn income in Switzerland.

How does the deduction work?

• The employer is obligated to deduct the owed tax (federal, cantonal, and municipal taxes) directly from gross salary and transfer it to the cantonal tax administration.
• For the person subject to withholding tax, the tax liability is generally settled. No annual tax return needs to be filed.

Good to know:

• Cantonal differences: Withholding tax rates vary by canton and depend on your gross income, marital status, and number of children.
• Subsequent ordinary assessment (NOV): With a gross annual income over CHF 120,000 or significant additional income not subject to withholding tax, an ordinary tax return must subsequently be filed. Already paid withholding taxes are credited.

Partial taxation of dividends

Normally, the profit of a corporation (AG) or LLC (GmbH) is taxed twice:

• First taxation: The company pays profit tax on corporate earnings (legal entity).
• Second taxation: The shareholder pays income tax on the distributed dividend (natural person).

Partial taxation reduces the second taxation (income tax on dividends) to correct this inequality. Otherwise, it would be unfair to shareholders.

Who benefits from partial taxation?

The relief is only granted if the shareholder holds a qualified participation.

• Requirement: As a natural person, you must hold at least 10% of the share or nominal capital of the company.

How does partial taxation work?

With partial taxation, the dividend is not credited as taxable income at 100%, but only at a reduced percentage.

• Direct federal tax (DBG): Dividends from qualified participations are taxed at 70% in both private and business assets.
• Cantonal and municipal taxes (StHG): A minimum taxation of 50% applies here. This means cantons must tax dividends from qualified participations at least 50% (many cantons apply exactly 50% – this should be checked per canton.)

An impressive calculation example:

Let's assume you receive a dividend of CHF 10,000 from your qualified participation:

• Federal level: For direct federal tax, only CHF 7,000 is credited as taxable income. Your savings: 30% of the dividend (CHF 3,000) remain tax-free at the federal level!
• Cantonal level: In most cantons (e.g., applying the minimum rate), only CHF 5,000 is booked as taxable income. Your savings: 50% of the dividend (CHF 5,000) remain tax-free at cantonal and municipal level!

Withholding Tax (VST) 18.02.2026 NEW!

Withholding Tax (VST) in Switzerland – report safely & settle correctly

The withholding tax (VST) is a 35% security tax on dividends, interest, and certain capital gains in Switzerland. It ensures correct declaration to the tax authorities.

For companies, VST is a sensitive topic: errors with dividends, hidden profit distributions, or loans to shareholders quickly lead to back taxes, default interest, and unnecessary risks.

Where does withholding tax arise?

VST is particularly due on:

• Dividend distributions from AG or GmbH
• Interest payments on certain loans
• Benefits in kind to shareholders
• Certain insurance or capital benefits

How is VST reported?

Settlement is made to the Federal Tax Administration (ESTV). For dividends, reporting is typically done via ePortal (Forms 102, 103, 110) within 30 days of maturity.

Under certain conditions, the notification procedure can be applied instead of payment (e.g., for qualified participations - Forms 106, 108, 823 etc.).

Can I get the 35% back?

Yes – provided it is correctly declared:

• Private individuals receive the withholding tax back through their tax return.
• For international structures, double taxation agreements (DTA) apply.

Why FinanceRock?

We review:

• Dividend distributions
• Shareholder loans
• Benefits in kind
• Deadlines & notification procedures
• Optimization for holding structures

This way you avoid unnecessary tax burdens and liability risks. Request a consultation on withholding tax now and act with legal certainty.