What is Verrechnungssteuer?
Verrechnungssteuer is Switzerland's federal withholding tax, levied at 35% on dividends from Swiss companies, interest on Swiss bonds and bank deposits exceeding CHF 200 per year, and lottery winnings. It is a collection mechanism to ensure taxpayer compliance — Swiss residents can reclaim the full amount by declaring the income in their tax return.
Current Rate (2025)
35% on dividends, bond interest, and certain bank interest. Bank interest only subject to withholding when total annual interest from a single bank exceeds CHF 200.
Example
A Swiss resident receives CHF 50,000 in dividends from their GmbH. The company withholds CHF 17,500 (35%) and remits it to the ESTV via Form 102. The shareholder receives CHF 32,500 net, declares CHF 50,000 gross in their tax return, and reclaims the CHF 17,500.
How Verrechnungssteuer works in Switzerland
The Verrechnungssteuer (federal withholding tax) is governed by the Verrechnungssteuergesetz (VStG) and administered by the ESTV. It is one of Switzerland's oldest taxes and serves primarily as a compliance mechanism rather than a revenue-maximising tool.\n\n**Scope**\nThe 35% withholding applies to:\n1. Dividends from Swiss AGs, GmbHs, and cooperatives\n2. Interest on bonds issued by Swiss issuers (Obligationen)\n3. Interest on bank deposits in Switzerland where annual interest exceeds CHF 200 per account per bank\n4. Lottery winnings above CHF 1,000\n\nNote: ordinary trade invoices, salary payments, and loan interest to shareholders are not subject to Verrechnungssteuer (though salary is subject to AHV/income tax, and excessive interest on shareholder loans may be reclassified as a hidden dividend).\n\n**The compliance mechanism**\nThe 35% rate is intentionally high. The ESTV publishes the view that 35% on top of the income tax due should be painful enough that taxpayers prefer to declare — but on declaration, the full 35% is credited back. Non-declarers permanently lose the 35%, effectively paying 35% tax on top of any cantonal income tax assessment that happens to pick up the income.\n\n**Company obligations**\nWhen a Swiss company pays a dividend, it must:\n1. Withhold 35% from the gross dividend amount\n2. Remit the withheld amount to the ESTV within 30 days of the dividend payment date\n3. File Form 102 (Meldung der verrechnungssteuerpflichtigen Leistung) with the ESTV\n4. If using the notification procedure (Meldeverfahren) for inter-group dividends, file Form 106 instead\n\n**Meldeverfahren (notification procedure)**\nFor qualifying inter-company dividends within Swiss groups (parent holds 20%+ of subsidiary, both Swiss residents), the company can apply for the notification procedure — instead of physically withholding and remitting 35%, it simply notifies the ESTV. This reduces cash flow impact.\n\n**Treaty reclaims for non-residents**\nForeign shareholders file refund claims (Form 25 or applicable DTT forms) with the ESTV. Processing times vary from 3 months to over a year depending on the treaty partner country.
Related terms
In Switzerland, dividends paid by a company are subject to Verrechnungssteuer (withholding tax) at 35% at source. Shareholders resident in Switzerland can reclaim the full 35% against their personal income tax (Einkommenssteuer). For qualifying corporate shareholders holding at least 10% of share capital (or participation worth CHF 1 million), a Beteiligungsabzug (participation deduction) effectively exempts most dividend income at the corporate level.
Quellensteuer is Switzerland's withholding tax on employment income paid to foreign nationals who do not hold a C permit (permanent residence) or are not Swiss citizens. It is withheld by the employer from salary at source, at cantonal-specific rates, replacing the normal self-assessment income tax obligation for the affected employee.
MWST (Mehrwertsteuer in German, TVA in French, IVA in Italian) is Switzerland's value added tax. The standard rate is 8.1%, with a reduced rate of 2.6% for food, books, newspapers, medicines and certain agricultural goods, and a special rate of 3.8% for accommodation services. VAT registration is mandatory for businesses with annual turnover exceeding CHF 100,000.
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