The withholding tax of 35% is referred to as "object tax". It is owed based on the gross income from movable assets, whereby with the term "movable assets" in particular interests and dividends are understood. In addition, 35% withholding tax is payable on lottery winnings and insurance benefits. The tax amount is deducted at the source, which is usually an interest-paying bank or for dividend payment, the company appropriating the dividends.
If a company is involved, the income from the capital (interest and loan), hidden profit distributions and the nominal value of the shares exceeding liquidation surplus are taxed. Furthermore, the added value from the nominal value of the shares is also subject to withholding tax if the public company acquires its own shares.
Using an example derived from the practice, the actual execution is explained following. If a public company, in this case, Company X assigns its shareholders dividends in the amount of CHF 100.00, the shareholders only receive 65%, which is specifically CHF 65.00. The remaining 35% of the dividends, which in turn corresponds to CHF 35.00, are retained by the company and paid to the federal government (ESTV = Eidgenössische Steuerverwaltung = FTA = Federal Tax Administration). Shareholders who are residents of Switzerland receive the paid CHF 35.00 (35%) back after their income has been declared in their personal tax return. Usually, the taxpayer does not receive his funds in cash, but rather in the form of a credit to other taxes.
Persons (natural persons and legal entities) with residence respectively abroad can claim the withholding tax incurred if Switzerland has a corresponding double taxation agreement (DTA) with that country. If this is not the case, the withholding tax is a final tax and there is not entitlement to recovery.
