A Penny Saved is a Penny Earned

Tax Matters Part 2: Reclaiming withholding tax for dividends on Switzerland shares

Tax Matters Part 2: Reclaiming withholding tax for dividends on Switzerland shares

As tax matters are an important aspect of personal finance, we are continuing with Part 2 of this short series. For Part 1 of our article on tax matters, do click here.

If you’re working in a Swiss-listed company like me, there is a good chance that you may be granted company shares or ESOP. The Swiss are known for some of the most innovative companies in the world. In addition, they have a stable financial ecosystem, which is no surprise why many Russian oligarchs store their wealth there.

Data from The Business Times shows that Swiss investments in Singapore climbed to a record S$60.7 billion at the end of 2018, representing a 57% increase from the year before. This figure will only increase as they look to strengthen their position in the ASEAN region in banking and financial services, insurance, pharmaceutical, and manufacturing etc.

As of today, below are some of the largest Swiss listed companies that you would have come across in one way or another in your daily life.

  • Credit Suisse
  • UBS
  • Julius Baer
  • Zurich Insurance Group
  • Swiss Re
  • Nestle
  • Roche
  • Swatch
  • Global Blue
  • Glencore

Source: UBS

However, if the Swiss company that you are working for issues dividends on its shares, the amount of withholding tax on gross dividends from Swiss shares is 35% as required by the Swiss Federal Tax Administration. That is a huge chunk off your total dividends.

Source: Clearstream Deutsche Börse Group: Customer Tax Guide for Switzerland

But what I’ve found out is that because of the double taxation agreement between Singapore and Switzerland, citizens from Singapore entitled to dividends for their Swiss shares, which are previously 35% tax withheld, can claim part of it back. Based on the below Article 10 from the official document of Agreement between the Republic of Singapore and the Swiss Confederation for the avoidance of double taxation with respect to taxes on income, the maximum tax that you need to pay is 15% of the gross amount of the dividends in all other cases. If you would like to read the full document, you can find it here.

Source: IRAS

The procedure to reclaim excesss withholding tax is detailed below.

1. Go to this website https://www.estv.admin.ch/estv/en/home/anticipatory-tax/claim-refund/domicil-abroad.html

2. Download the free software Snapform Viewer

3. For Singapore citizens, download, fill in and print Form 60 (english) – Country without own form

4. Obtain a Certificate of Residency (COR) from IRAS website

5. Submit Certificate of Residency (COR), hard copy Form 60 from point #3, and statement of income showing your dividends that were taxed at 35% to IRAS

6. Once you get back an endorsed Form 60 from IRAS, submit said form, Certificate of Residency, and statement of income showing your dividends that were taxed at 35%, to the Federal Tax Administration of Switzerland (full address of Eigerstrasse 65, 3003 Bern, Switzerland)

Do note that the whole process can take up to several months as the Swiss authorities process over 300,000 claims each year.

For our US readers, if you are a US citizen working for a Swiss company and have dividends on your company shares, you can also be entitled to a refund of the 20% excess withholding tax on dividends paid from your company’s shares, so essentially the effective tax rate you would have paid is just 15%. (The calculation is as such: 35% tax withheld minus the 15% treaty withholding rate = 20% excess withholding tax back to you). That’s a huge lot of savings!

Do note that there is a deadline of 3 years following the calendar year that your dividends were first paid to you, to reclaim your withholding tax. For example, if the dividends were first paid out on June 2022, the reclaim form must be submitted within 31 December 2025. Any late submissions will likely forfeit your chance to reclaim back the withholding tax. The process to claim is similar to the one for Singapore citizens.

Even though all this information is available on the IRAS website, I did not find it intuitive and it took a bit of reading and digesting to understand the process. I’ve also found that most people are unaware of this, and I believe that many of the firm’s HR will not proactively inform you on all these since it is the onus on your part to do your due diligence.

Paying taxes on anything, be it goods and service tax (GST), income tax, or tax on dividends is always a sensitive topic. Nobody likes to pay more taxes than they really should. So if there are legitimate ways to reduce it or reclaim back part of it, do share it with us so that more people can be aware of this topic.

If you like our posts, follow our Facebook, Instagram and Twitter page (@financeandtoast) so that you do not miss a single update.

Best wishes,

Finance and Toast

Leave a Reply

Your email address will not be published.