How to get credit/refund for withholding taxes on Dividends (for Swiss Residents)

Wiki
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***If you are not Swiss resident for tax purposes, this post is not relevant for you.

Dividends are different than interests . Let’s take example to make things clear for dividends. Let’s assume you own three ETFs (CHSPI, VT, and VWRL)

  • VWRL is domiciled in IE
  • CHSPI is domiciled in Switzerland
  • VT is domiciled in USA

Dividend withholding tax works as following (assuming you have filled W-8 BEN with your broker)

Case 1 -: Swiss broker (like Swissquote)

  • VWRL will have 0 withholding tax
  • CHSPI will have 35% withholding tax, let’s call it C1
  • VT will have 15% + 15% = 30% , let’s call them U1 and U2 (15% each)

Case 2 -: International Broker (like Interactive brokers)

  • VWRL will have 0 withholding tax
  • CHSPI will have 35% WHT, C1
  • VT will have U1 = 15% WHT , U2 = 0

How do you claim these back ?

  • Tax C1 is claimed under standard tax form and will be used as a credit to adjust your final tax bill
  • Tax U1 will be claimed using DA-1 section of tax return (ausländischer Quellensteuern)
  • Tax U2 will be claimed using RUS section (zusätzlichern Steuerrückbehalt USA)

In Zurich -: using online software Form DA-1 & RUS are together.

Notes -:

  • C1 & U2 will always be 100% credited/reimbursed because these amounts are withheld in Switzerland
  • For U1 special calculations are done by tax office. This is a tax credit for tax withheld in USA (for US ETFs) or other foreign jurisdictions & final tax credit will depend on few variables based on the tax return of the individual. Purpose here is to avoid double taxation
  • If U1 is less than 100 CHF (across all securities) for the financial year, no refund application is allowed via DA-1 form. There is no minimum amount for the U2 refund via R-US, though.
  • Please note this discussion is only about WHT Taxes at the level of ETF. There are also some WHT taxes which ETFs need to pay depending on which stocks they buy. That remains within the ETF performance and investor cannot claim (it is referred to as unrecoverable tax)
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Changed U1 from refund to tax credit.

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Just to be sure.
Is U1 really a credit? Don’t we always get it as a separate refund in bank accounts?

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It works as a credit. Switzerland can’t and won’t refund what the US has kept.

That is why there are “complicated” calculations: They attribute what you call U1 to the gross dividends from which it was witheld. Then they calculate how much you would normally have to pay on those gross dividends. Finally they subtract the already paid U1 from what you would have to pay.

If your average tax rate is too low, this will be negative. They don’t “refund” this negative number because they only credit what you would have had to pay to them.

If you have debt interest, you can subtract that from your income. But they don’t tax you on the part you already subtracted. So again, they won’t credit anything that you don’t have to pay. That is why mortgage interest reduces tax credit from DA-1

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Got it. I think then it’s more of terminology difference .
I kind of relate credit to „a number that offsets your tax liabilities „ like C1

But it’s fine
Thanks for clarity

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I want to stress that this terminology difference is one of the main pain points in troubleshooting people’s “refunds”. It pops up again every couple months.

Switzerland will not refund foreign WHT, they will credit it to what you would have had to pay on that specific income. If you paid more, that is your problem.

Compare Swiss WHT which get refunded in full for filing taxes.

The actual discrete money amounts paid to or received from the tax office can reflect those effects or just be some (partial) net after calculation.

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Helpful, thank you for the post!

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There is no R-US withholding at all by foreign brokers. Hence U2 is 0 in case 2.

You get 85% at IBKR but there is no 70%+15% split. DA-1 is to get a tax credit for the remaining 15%, yes (exact amount depends on your tax rate).

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The CHF 100 minimum applies only to U1 (DA-1), not U2 (R-US). I’ve corrected that point in the post.

From the ZH DA-1 guide:

Im Gegensatz zur Anrechnung ausländischer Quellensteuern besteht für die Rückforderung
des zusätzlichen Steuerrückbehaltes kein Mindestbetrag von CHF 100.–.

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Thanks @jay
I was thinking about it if the limit is for total or just U1

Since I don’t have a personal experience on this yet. Just to be sure. If an investor only have 100 shares of VT at Swissquote, can they still apply to get 30 USD back?

Assuming 2 USD per share annual dividend & no other investments from RUS or DA 1 perspectives

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Yes, that’s how I understand it. The R-US refund is unconditional (assuming it’s been declared properly with broker documents). I can’t confirm from personal experience as I never held US securities at a Swiss broker with W-8 BEN.

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I have just moved to Switzerland and I have some
US stock investments like AAPL.

I have signed the W8ben form and IBKR keeps 15% of the dividends for the withholding tax at source in US.

Can this be recovered via the DA-1 form? What is the min gross dividend amount to qualify for this tax credit?

Thanks

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Yes, there is no difference between US stocks and US-domiciled ETFs with regards to DA-1. I.e., equivalent to the VT explanation in this wiki. The minimum gross dividend amount is CHF 667 (resulting in CHF 100 US WHT).

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For all securities in DA-1, not from each one :grin:.

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Edited out. I don’t recall specifically filing the W-8 BEN form, other than the usual non-affiliation with the US form when opening the account. Moreover I recall IBKR requesting that the W-8 BEN be signed year after year, something I most definitely haven’t done with PF. I sent a message to PF support but if someone has more reliable memory on that matter I’d be keen to hear.

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I don’t think you need to fill out a W-8BEN for PF to get the 15+15% withholding (they use the tax residence information you gave them).

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I think every bank does their own thing
Some just use the info provided by you at time of registration and some ask for proper form

Best is to ensure that they have set you up for 15% WHT in UsA or else you would end up with 30% in USA which is very difficult to recover

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I confirmed that at least PF doesn’t “offer” the W-8 BEN form. @nabalzbhf kindly explained to me where to see the exact 15+15% in PF’s corporate actions docs.

If I understand the original and very useful breakdown, one holding a US ETF in a Swiss broker who doesn’t “do” the W-8 BEN, they would have to submit the docs from the broker showing the breakdown of the U1 and U2, the completed DA-1 and R-US forms (would be the same values in both essentially) with their tax forms to be refunded the U2 and after high-level science credited all or part of the U1 on their taxes.

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Right.
I am sure statements from brokers would show the tax deduction clearly .

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Hi! Sorry to bother but I’m hoping for help on the whole with-holding tax question. Based on the recent posts, and if I have only Ireland based funds (VRWL) at Post Finance, I’d like to learn what I need to do to not lose anything on taxes that I could get back. Any tips would be welcome! I’m having trouble getting my head around this subject. Thanks in advance!