Filling in the DA-1

Taxes
135

I think then it would be 30% + 0% but then you would not be able to recover the full tax easily. Swiss tax treaty only supports refund of 15% held in US.

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136

Yes, I believe the “additional tax deduction” is only applied to dividend payments that got reduced from 30% to 15%.

137

Correct, while you would be able to file DA-1 as usual to get a tax credit of up to 15%, you’d have to get the refund of the other 15% directly from IRS. If successful, you’d likely get a physical check by mail (with high fees to cash here).

138

As imprecise terminology can cause confusion, a small clarification: You never get an actual refund for the 15% US WHT deduction, the US always keeps that money. What you can get via DA-1 is a Swiss tax credit for the amount (to eliminate double taxation). That’s also why the DA-1 guide and some tax software/forms use the term “nicht rĂŒckforderbare auslĂ€ndische Steuern”.

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139

I think for all practical purposes, you are the subject matter expert on this DA-1 topics :slight_smile:

Almost all posts in past have been very informative

140

Are you sure, they told me you don’t need the W8-BEN to be subject to the 15+15. (Tho I still send them a scanned form so I can’t say whether it’s required or not).

(I’m fairly sure most people won’t file one, if you know someone holding US stock at PF or SQ maybe you can ask them to check how it’s reported, iirc it says explicitly the 15+15, in any case it was sufficient for DA-1)

141

I also don’t have US stocks there. So don’t know for sure. But I also did send them the form anyways

142

I assume what they meant is that normal account opening as Swiss resident already provides all necessary data to not require an explicit W-8 BEN. So you normally don’t need to take an extra step but it’s still equivalent to filling out a W-8 BEN.

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143

Interesting, I didn’t know the US keeps that money


So, if someone has a total income of, say, CHF 20’000 of purely dividend income from US companies, taxed at 0.61% with CHF 122 (if you live in the city of Zurich), Switzerland will pay the person the US withholding tax of CHF 3’000 out of Switzerland’s pocket?

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144

No, the cap of DA-1 is (approximately) the Swiss taxes on the foreign dividends, so you’d only get a tax credit of about CHF 122 as well. In the end you wouldn’t pay any Swiss taxes but you’d still pay 15% to the US via WHT.

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145

And to add on this, there is another cap: the refund cannot exceed the amount of income taxes you have paid in CH for that year, as per SR 672.201 art. 9 al. 5:

Der Maximalbetrag darf nicht höher sein als die Summe der schweizerischen Einkommenssteuern im FÀlligkeitsjahr.

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146

I am thinking for someone who is retired early and only have dividend income to live with.

Dividend income -: 50,000 CHF
Let’s assume , Taxable income -: 50,000 CHF
Applicable tax -: 5000 CHF (Kanton ZH, plus federal)
US WHT -: 7500 CHF
Refund -: 66%

If the dividend income was 25.000 CHF
Applicable tax -: 1400 CHF
US WHt -: 3750 CHF
WHT refund -: 37%

For such individual, US ETFs advantages would be reduced versus the UCITS range.

P.S -: to get 50,000 CHF dividends, one need to own 2,5 million CHF worth VT. Of course with other instruments such numbers can be achieved with lower capital

147

Not sure I fully grok this. Let me try to wrap my head around this:

If 
 er, say 
 a friend made, say – let’s use round numbers – 10 x the income of my friend above, i.e. CHF 200k instead of 20k.
He made US dividend (and 15% taxed at source) income of CHF 115k, and other type income (not taxed at source), with final taxable income of around CHF 200k.

Said friend then would pay about CHF 55k taxes in total (municipality of Zurich, canton, and direkte Bundessteuer). Let’s say for simplicity that the portion of Swiss taxes on the foreign dividends is 115/200=0.575 of CHF 55k = CHF 29k.
They get their US WHT of about CHF 17k from Switzerland. It’s under the cap of CHF 29k and it’s financed via the CHF 17k – the other 15% – of RĂŒckbehalt USA.
Total DA-1 return reimbursement of CHF 34k.

Side comment if the above is roughly true:

Works for m 
, er, 
 my friend, as they get the full withholding tax “back”, but seems unfair to my other friend mentioned above whose sole income is CHF 20’000 dividend income taxed at source from US companies. He leaves the RĂŒckbehalt USA of CHF 3’000 on Switzerland’s table.
Kind of feels like reverse progression for Swiss based US dividend investors? See also @Abs_max’s calculations just above.

148

I believe this is happening because DTAA only reduces double taxation but it doesn’t reduce taxation.

So people with lower income tax slab don’t get much benefit because the US tax is higher than Swiss tax in that case.

For me this is enlightenment even though maybe it was obvious. But always good to put numbers together

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149

Though shouldn’t you get back the R-US (extra 15%) at least? (Similar to how you get back the swiss withholding regardless of your tax rate)

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150

Just to be clear ruckbehalt USA is not an issue. It would always be given back 100% because it’s just provisional tax take by SQ. if SQ deducts more than liable, everything will be refunded for sure.

The issue is only with 15% US Quellenstuer which is kind of unrecoverable

P.S -: this name Ruckbehalt USA should be changed to something else . Kind of sounds like WHT in US

151

Yes I just responded . @Your_Full_Name was confused a bit it seems :slight_smile:

But with 115,000 CHF dividends , it’s alright :wink:

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152

See, this is what confused me initially. If I understood @jay correctly, the guy making CHF 20k (his sole income) in US dividends taxed at source gets neither the WHT nor the RUS:

153

The Swiss tax credit for 15% US WHT is not financed via the “ZusĂ€tzlicher RĂŒckbehalt US”. The former is a reduction in Swiss taxes to (approximately) eliminate double taxation. The latter is completely separate, withheld by Switzerland, and can be ignored in this calculation (you always get the full amount back, assuming you declare it in DA-1/R-US).

It’s not a regressive tax but it effectively results in a minimum tax rate of 15%, which is higher than the lowest tax rate in Switzerland. However, there is nothing Switzerland can do about it (assuming they can’t get a better DTA with the US and the government doesn’t want to simply gift you money).

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154

I think this was mainly referring to WHT stuff. Not RUS

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