Withholding tax on Italian Government bonds


I am thinking about buying some bonds issued by the Italian Government.
On the issued coupons it is applied a withholding tax of 12.5% directly by the Italian authorities.
Because I am Swiss resident I will then have to pay Swiss taxes (which I understand are 35%).

Usually in these cases there are treaties in place to avoid double taxation, but talking to the broker (Postfinance) I was told that in this case it is not possible and so I would have to swallow the double taxation…which makes these securities less interesting.
Was I naive to think I could do this via DA-1 like for US based securities?

Can someone shed a light on this? Is it true that there is not treaty to protect from double taxation in this case?

Thank you

PS I have searched on the forum and could not find an answer

The 35% you might be referring to is the so called Verrechnungssteuer [1], which is levied on dividends (and a few other things like interest) from swiss entities only. As a swiss resident you will receive those 35% back after declaring those earnings in the tax return. The main purpose of this is to combat tax evasion, because the Verrechnungssteuer is higher than the maximum tax burden levied in most cantons.

According to the canton Zurich [2] you can claim a credit for foreign withholding tax from Italy, but the taxable amount needs to be greater than CHF 100.-

And here are some more informations regarding the tax treaty between Italy and Switzerland with documents to partially reclaim withheld taxes: Doppelbesteuerungsabkommen Schweiz - Italien | ESTV

[1] Verrechnungssteuer VST - das Wichtigste auf einen Blick | ESTV
[2] https://www.zh.ch/content/dam/zhweb/bilder-dokumente/themen/steuern-finanzen/steuern/natuerlichepersonen/2023/vst-formulare/438%20Wegleitung%20DA1_DA-3%202023%20bf%20DEF.pdf


I wish. In ZH the ceiling of the marginal income tax rate is about 42% (incl. federal taxes).

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I think the issue is that when you use DA-1 form, the options are limited. DA1 is not used to claim 35% back. It is used to claim Foreign withholding taxes back.

For US securities, there are two possibilities (15% US WHT or 15% US WHT and 15% Swiss WHT)

I think for Italian securities maybe it’s only 12.5% and it’s not clear how would you claim the remaining 35% if it is deducted by Swiss institution.

What is not clear is - are you sure you will have 35% deduction in Switzerland? Normally such deduction should only be applied if Swiss entity is paying interest to you. But in your case it’s an Italian institution. I would suggest you should double check if this 35% you are talking about is really applicable.

no swisswitholding tax on foreign dividends/interest