US Dividend without Swiss Withholding Tax?

Taxes
1

Dear all,

I noticed that there is no Swiss withholding tax imposed on US stock dividend. There is 30% or 15% withholding tax from the US perspective depending how you declare it. That part is clear.

But it seems that there is no Swiss withholding tax on US stock dividend. There are always 35% Swiss withholding tax on Swiss stock dividends. That part is also clear.

So, basically, you don’t have to declare your dividend earnings from your US stocks on your Swiss tax declaration, because those dividend earnings are irrelevant for the Swiss tax authority? Am I missing something here?

2

You do.

It’s just that for those remaining 15% you get a “tax break” when CH taxes your dividends as income.
E.g. instead of 20% (your hypothetical marginal tax rate) they would tax them 5%, because you were already taxed 15% on them.

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3

You are missing (at least) two things here:

  1. Dividends, also US Dividends. are income, and taxed like that in Switzerland - so you have to declare them.

  2. In case of US dividends, you can ask to get the 15% US-witholding tax back with the Swiss DA-1 form.

(There might be more points, but Iḿ sure someone more knowledgable than me will jump in).

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4

Hey,
Thank you for your prompt answer.
I don’t think I’m missing those points you mentioned.

  1. If Switzerland doesn’t impose 35% on those US dividends automatically, who would want to declare them? The withholding tax is only there to avoid potential tax evasion. But no Swiss broker does that on US dividends. That’s why I’m surprised.

  2. That case is not entirely correct. You don’t have to file DA-1 from to get the 15% from your broker. Just file the W8 form and you’re good.

5

Everyone who follows the law and doesn’t do tax evasion? Note that there’s automatic data sharing anyway.

We’re talking about the remaining 15%.

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6

Thanks!

My Swiss broker told me the following:

Just fill out the W8 and send it back to the broker. The broker will refund the 15% back to my account.
So I don’t have to declare DA-1 to get that 15% back. A loophole?

7

Your swiss broker is either mistaken (they should withhold 30%, due to extra US withholding for swiss brokers) or incompetent :slight_smile:

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Haha, maybe. Yes, they did withhold 30%. But when I file W8, they will return 15% to me without filing DA-1. Is that true?

9

Sure, but I’m just questioning the process, if there is no withholding, who would want to declare?
Also, no, there is no automatic data sharing in Switzerland. We have banking secrecy law, still within Switzerland. I don’t think any Swiss bank would share client data with Swiss tax authority. That doesn’t exist.

Yes, the remaining 15% which can be clawed back from the broker if W8 is filed, I believe without doing the DA-1.

10

As @nabalzbhf mentioned, Swiss brokers should withhold 30% of US dividends. Assuming the broker is an IRS Qualified Intermediary (QI), 15% are US withholding taxes and 15% are additional Swiss withholding. You always get the latter back when filing your taxes with DA-1 and normally also get the former credited or refunded (certain conditions apply). I.e. total withholding amount is very similar for Swiss and US dividends with Swiss brokers. The situation is different with foreign brokers but there you typically have AEOI these days.

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11

Thanks jay, I get it now, I think my broker told me BS. They said just file W8 and you get your 15% back which is not true. I still have to file DA-1 to claim the 15%.

Yes, my broker is a Qualified Intermediary.

To my understanding, I don’t have to fill out the W8, but just the DA-1 to get my 15% back from my canton. The broker won’t pay me the 15% and they will probably send that money to the Swiss tax authority.

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12

Anyone following the law… how is that different from other income? (Swiss citizens and permanent residents are not taxed at source on most income)

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13

To claim 30% if it’s a swiss broker.

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14

I’m sure there are lots of people who wouldn’t do it, if there was no withholding tax. That’s why the legal system imposes a withholding tax on individuals to prevent tax evasion.

15

If you don’t file the W-8 BEN, your broker deducts 30% US WHT and the Swiss tax authorities will only credit/refund 15% of that. The other 15% you’d have to get directly from IRS. Please note that many brokers automatically file a W-8 BEN for you based on your US tax status declaration. It may not be necessary to explicitly file an actual W-8 BEN form.

16

That’s right. However, almost no one will fetch the other 15% from IRS as it is a super time consuming process involved with dealing with IRS directly. It’s simply not worth it in practice. Correct me if I’m wrong. Does anyone of you do that?

17

Please read jays reply once more: you only have to deal with IRS if you “forgot” to fill out W-8 BEN. Which, I assume, most people in this forum have filled out correctly. Also, please search for WHT in the forum. It’s not the first thread about it.

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18

Thank you. I was referring to the other 15% which we need to get directly from IRS. And I was saying that most of us don’t get that because of all the troubles we have to deal with IRS. No one really does it unless you get a huge amount of dividend from US. It’s a bit misleading since no one can really get all 30% back.

19

Once again - you will not get anything “back from IRS”.
You can look at it from many different angles, but here is one:
Swiss tax authorities will count that 15% withholding amount towards your XX% income tax rate, and tax you only for the difference of XX-15.
US “keeps” their 15% whatsoever.

So whether you “get something back”, or “get it counted towards” is just a matter of language. :slight_smile:

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20

@dbu Thank you so much!

But this is getting even more confusing the more I read about it. I even read the Mustachianpost blog about this topic.

Once again:
WHT 30% = 15% + 15%.

Foreign broker like IB:
The first 15% is gone to IRS for good.
they don’t withhold the second 15% as foreign broker.

In this case, do I still have to or can I get the first 15% back by filing DA-1 form?

Swiss broker like Swissquote:
The first 15% is gone to IRS for good.
SQ withholds the second 15%.

If I file DA-1, how much can I get back in total? Only the second 15% or all?

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