On dividend payments of Swiss companies withholding tax of 35% is generally due. The Swiss company is required to deduct the withholding tax and remit the amount withheld to the Swiss Federal Tax Authorities (SFTA). Based on Swiss domestic law or the applicable double tax treaty, the shareholder of the Swiss company may request partial or full refund of the withholding tax. However, for intra-group dividends the notification procedure might be applicable. Under this procedure, the Swiss company fulfils its withholding tax obligation by way of notifying the SFTA of the dividend distribution instead of withholding and remitting the (full) dividend withholding tax.
In order to benefit from the notification procedure, the corresponding official withholding tax declaration form as well as the notification form have to be filed with the SFTA. Both forms have to be filed within 30 days of the dividend due date. In case no specific due date has been defined for the dividend, the dividend becomes due on the date of the shareholders’ meeting.
In the case of dividends paid to a foreign parent company, the Swiss company additionally has to request a permission to apply the notification procedure with the SFTA. This request has to be approved before the dividend becomes due.
Federal Court Jurisdiction and Practice of the Swiss Federal Tax Authorities
In a leading Federal Court decision issued in 2011, the court determined that the 30-day filing period is a forfeiture deadline. As a consequence, noncompliance with the 30-day declaration leads to the definitive forfeiture of the right to apply the notification procedure.
Based on the Federal Court jurisdiction the SFTA adopted a restrictive practice. They requested the subsequent payment of the full Swiss withholding tax of 35% plus levied interest for late payment (5% per year) in case the Swiss dividend payer did not file the declaration and notification forms within the 30-day period. If applicable, the withholding tax could then be recovered by the shareholder in course of the ordinary refund procedure. However, the interest for late payment represented a final cost.
New Rules in Favour of Taxpayers
Under the revised Swiss Withholding Tax Act, the application of the dividend notification procedure is applicable even if the 30-day filing period has not been complied with as long as the substantive requirements for the notification procedure are met. The 30-day filing period is not considered as a forfeiture deadline any more. Consequently, late filing of forms does not have default interest consequences any more. However, late filing of the declaration and notification forms can be sanctioned by means of an administrative fine.
The new rules will apply retroactively. Therefore, interest payments made since 2011 can be claimed back via application to the SFTA.
Subject to a referendum for a public vote, the new rules enter info force beginning 2017.