Anticipatory tax (AT) is a federal tax levied at source on certain income from Swiss movable capital assets, notably dividends paid by Swiss companies, interest on Swiss bonds and bank deposits, and lottery winnings. Governed by the Federal Act on Anticipatory Tax (ATA, RS 642.21), it is levied at a rate of 35% on the gross payment. Its main function is to ensure the declaration of Swiss movable capital income by Swiss fiscal residents, who can recover the anticipatory tax only if they have declared the corresponding income. For foreign beneficiaries, partial or total refund may occur through double taxation treaties. PBM Avocats advises companies and investors on all matters relating to anticipatory tax in Geneva and Lausanne.
Taxable Event and Base of Anticipatory Tax
The taxable event for anticipatory tax on dividends (art. 4 para. 1 let. b ATA) is the payment or due date of the taxable payment — that is, the date on which the shareholder acquires a firm right to the dividend, generally the date of the general meeting approving the distribution. The obligation to withhold and pay arises within 30 days of that date (art. 16 ATA). Failure to pay within this period exposes the company to default interest and fines.
The base is the gross payment made. For dividends, it is the gross amount before deduction of anticipatory tax. The company pays the shareholder the net amount (65% of the gross payment), retains 35% which it pays to the FTA. It submits to the FTA the declaration form 103 (dividends) within the 30-day deadline and simultaneously pays the amount of anticipatory tax. For bank interest, it is the bank that withholds and pays anticipatory tax in accordance with the procedures stipulated by the FTA.
Refund of Anticipatory Tax to Swiss Residents
The refund mechanism is the counterpart of the incentive function of anticipatory tax. A Swiss fiscal resident — natural person or legal entity — is entitled to a full refund of the anticipatory tax withheld, provided they have declared the corresponding income or assets in their tax return. For natural persons, the dividend or interest must appear in the income return, and the value of the corresponding securities in the wealth return. The cantonal tax authorities then forward the refund application to the FTA.
For legal entities, anticipatory tax is refunded provided that the income has been recorded in the accounts (art. 25 para. 2 ATA). The application is filed directly with the FTA. If the legal entity has failed to record the income and requests the refund after a tax audit, a grace period may be granted, but the FTA may refuse the refund if the conditions are not met. PBM Avocats assists taxpayers in recovering anticipatory tax and defending refund rights in the event of a dispute with the FTA.
Partial Refund for Foreign Beneficiaries
Foreign beneficiaries of Swiss dividends may obtain a partial refund of anticipatory tax if a double taxation treaty (DTT) between Switzerland and their state of residence provides for a residual rate below 35%. The usual residual rate is 15% for dividends paid to individual shareholders and 5% or 0% for dividends paid to parent companies holding a qualifying participation. The refund application is filed with the FTA (form 82 or equivalent), accompanied by a certificate of fiscal residence in the DTT state. PBM Avocats manages these procedures for foreign investors in Switzerland and for Swiss companies that pay dividends to their foreign shareholders.
Frequently Asked Questions on Anticipatory Tax
Who is the taxpayer subject to anticipatory tax — the company or the shareholder?
The economic burden of anticipatory tax is intended to fall on the recipient of the income (the shareholder or creditor), but the obligation to withhold and pay it to the FTA rests with the legal entity making the taxable payment (the debtor company, art. 10 ATA). The company must withhold the 35% anticipatory tax when paying the dividend or interest, pay it to the FTA within 30 days of the due date of the payment, and remit the net balance to the shareholder. The shareholder may then request a refund of the anticipatory tax by declaring it in their tax return, provided they are a Swiss fiscal resident and have declared the corresponding income.
When does the right to a refund of anticipatory tax arise and within what period must it be exercised?
The right to a refund of anticipatory tax arises on condition that the beneficiary (a natural person resident in Switzerland) has declared the income or assets subject to anticipatory tax in their income or wealth tax return (art. 23 ATA — the declaration condition). The refund application must be filed within the tax objection deadline applicable in the canton of residence, in practice no later than when the tax return is filed. For legal entities, the refund is granted if the income has been recorded in the profit and loss account and is connected to a commercial activity. The deadline for refund applications is three years following the end of the calendar year in which the taxable payment fell due (art. 32 ATA).
What is a monetary benefit (hidden profit distribution) and how does it trigger anticipatory tax?
A monetary benefit (verdeckte Gewinnausschüttung) is a distribution of the company's substance to its shareholders (or related persons) that does not correspond to an ordinary commercial transaction — for example, the sale of an asset below its market value, the recording of private expenses, a loan to a shareholder without interest or on non-commercial terms. The FTA or cantonal authorities may reclassify these transactions as taxable distributions subject to 35% anticipatory tax (art. 4 para. 1 let. b ATA). The burden of anticipatory tax on an undeclared monetary benefit falls in principle on the company (debtor of the payment), which cannot seek reimbursement from the shareholder after the fact without the latter's agreement.
How does the notification procedure that substitutes payment of anticipatory tax work?
The notification procedure (Meldeverfahren, art. 26a ATA Ordinance) allows a Swiss company to substitute a declaration for the actual payment of anticipatory tax on intra-group dividends, provided that the recipient company holds at least 20% of the share capital of the distributing company. The declaration must be made to the FTA within 30 days of the due date of the dividend. This procedure eliminates the cash burden linked to the temporary financing of anticipatory tax. It may also be used for dividends paid to foreign companies benefiting from a DTT providing for a residual rate of 0% on dividends (e.g. CH-DE DTT for participations of 10% or more). In case of failure to comply with the 30-day deadline, the late notification procedure remains possible subject to conditions, but exposes the company to a fine.
Are capital gains and capital repayments subject to anticipatory tax?
In principle, repayments of paid-up capital — that is, the nominal value of the shares and reserves arising from capital contributions (CRC, art. 5 para. 1bis ATA, introduced by the Corporate Tax Reform II Act) — are returned to shareholders without anticipatory tax. Only repayments from profits or profit reserves are subject to 35% anticipatory tax. Companies must therefore maintain separate accounting for reserves arising from capital contributions and profit reserves (CRC reserve). Capital gains of natural persons on the disposal of securities held in private assets are exempt from income tax (art. 16 para. 3 DFTA) and are not subject to anticipatory tax, which is not a capital gains tax.