The Swiss dividend tax is one of the taxes established in Switzerland by the Swiss Confederation, the cantons and the municipalities.
The country is sometimes referred to as a tax heaven and there are many foreign investors, entrepreneurs and companies who choose to invest in Switzerland.
After the company completes its financial year and the profit is calculated, the shareholders are entitled to a share in the annual profit. A portion of the net profit, the dividend, is then distributed to the company shareholders. The Swiss dividend is allocated at a fixed amount per share.
Assessment and determination of dividends
The law stipulates that public limited liability companies in Switzerland must distribute 5% of their reported net profit per year to the general reserves, if the general reserves have not reached 20% of the paid-up share capital. Moreover, the net profit is subject to other provisions established by the company. These lead to the reduction of the assessment base for the dividend amount.
The dividend is determined only after all the appropriate allocations have been made according to the applicable laws and the company’s articles of association. The general meeting of shareholders determines the exact amount of the dividend by vote.
Federal withholding tax
The dividend tax is part of the Swiss withholding tax. The law stipulates that dividends in Switzerland are subject to a 35% withholding tax.
A company shareholder must declare the dividend as income tax. The gross dividend represents the dividend before the deduction of the withholding tax and the net dividend is what remains after the withholding that has been deducted. The amount of the gross dividend increases the taxable income.
The Board decides what amount of the profit should remain within the company. There is no fixed maximum or minimum percentage of the net profit that can be distributed as dividends, it can be anywhere between 0 and 100%. However, companies try to impose a constant dividend policy in Switzerland.
The goal is to keep the value of the dividend the same as in previous years, regardless of the current financial results.