Either way, I stick to my assertion.
Withholding taxes are (in most cases, for Swiss investors) not final. They do not substitute for your ordinary income tax. You can not pay withholding tax, reclaim that tax (possibly) and be done with it. Irrespective of withholding taxes, you have to pay Swiss taxes on that taxable income (gross) from the distribution. Even if it means you’re double-taxed - if, for some reason, you are unable to reclaim withholding tax.
PS: Actually you do not get different answers in the linked thread:
@Cortana’s question: “How about someone that retired early with 3M in assets and 70k in dividends (only source of income) of which 11k are withhold?”
@jay’s answer: “Taxable income from assets: 70k - 9k = 61’000”
Swiss income tax will have to be paid on that taxable income of 61’000.
You can also easily confirm by making a mock tax return with your canton’s tax software:
- Enter CHF 100’000 of employment income.
- Do the tax calculation in the software
- Now add another 1’000’000 of VT or any other U.S. fund listed in the ICtax database (it think it will even offer to add it to DA-1 in your canton’s software).
- Rerun the calculation → the tax calculated will be higher.
PPS: To clarify again:
You may get all withholding taxes back through to your tax declaration.
And the thread you linked above is about DA-1 forms to reclaim withholding tax.
The potential tax inefficiency I was referring to above is not about withholding tax in particular.
Say you hold 100’000 of a U.S. ETF that no management/upkeep costs and isn’t subject to WHT itself.
The fund receives 5’000 from the U.S. companies it holds for every 100’000 of stock they’re holding.
It will then distribute this 5’000 in dividend income in full to you, for a dividend yield of 5%.
15% of 5’000 (or 750) are withheld in U.S. withholding tax.
You can reclaim the 750 in full through the DA-1 form
You will still pay Swiss tax, say 20% (or 1’000) on the gross amount of 5’000.
That leaves you with only 4’000 net income to reinvest in more fund units.
If all of the companies held by the fund didn’t distribute anything but used these 5’000 to grow their businesses themselves, the ETF - and ultimately you - would only incur capital gains.