Swiss Government approves the objectives and key figures for a paying agent tax

Following the National Council's Commission for Economic Affairs and Taxes (WAK-N), the Swiss Government has also published its key figures for a reform of the Swiss withholding tax ( available only in German). The key figures are largely identical, but there are differences in detail. The Swiss Government also plans to combine an exemption of foreign investors with an improvement of the safeguarding purpose for domestic taxpayers.

Paying agent tax on domestic and foreign interest income and no reporting procedure for individuals

The Swiss Government intends to convert the Swiss withholding tax on interest into a paying agent tax and restrict the tax to domestic individuals. Swiss entities and foreign investors are to be exempt from Swiss withholding tax on interest. The key figures of the Swiss Government do not address a change of the tax rate of 35% or in the current reporting procedure. We assume that no changes will come-up in this respect.

In order to extend the safeguarding purpose for Swiss individuals, the Swiss Government - like the WAK-N - wants to apply Swiss withholding tax to foreign (non-Swiss) interest payments. Dividends of foreign equities (i.e. shares etc.) will remain to be exempt from Swiss withholding tax. In the view of the Swiss Government, this exclusion helps to reduce the complexity of the new system.

Collective investment schemes

The rules for domestic and foreign interest income within collective investment schemes remain an open subject. The Government strives for equal treatment for indirect and direct interest investments, in particular in order to eliminate today's tax disadvantages for Switzerland as a fund center.

Transitional regulation for to-big-to-fail instruments

For the existing TBTF instruments (CoCos, bail-in and write-off bonds), the Swiss Government intends to provide a transitional regulation. The instruments are currently exempt from Swiss withholding tax based Art. 5 para. 1 lit. i) of the Swiss Withholding Tax Act (available only in German).


While the WAK-N sub-commission proposes the possibility of outsourcing, the Swiss Government identifies no need to change the current regulation. The external processing of the withholding tax is well possible under current law. The Government rejects any further shift of duties. The external processing should not result in a transfer of liability to the administrator.

Liability and compensation of the paying agent

Like the WAK-N, the Swiss Government wishes to limit criminal liability to intent. The paying agencies should receive appropriate compensation for the work.

Dividends for structured products

In accordance with the parameters of the WAK/N sub-commission, the Swiss Government intends to extent the Swiss withholding tax on passed-on and manufactured payments. Latter, which are used to replicate bond interest, dividends and the like, are to be subject to Swiss withholding tax on a statutory basis. These payments aim to put the investor of indirect investment in equal footing to the income he receives in a direct investment.

Further mandates to the Federal Department of Finance (FDF)

The Swiss Government has instructed the Finance Department to examine two further measures to strengthen the Swiss capital market:

  • Adjustments to profit tax in the area of participation exemption;
  • Abolition of the Swiss stamp duty on Swiss debt securities.

Next step Consultation draft

The consultation draft should be available as early as autumn 2019.