Anticipatory tax (Verrechnungssteuer) explained in 3 simple steps

The anticipatory tax is an object tax levied on the gross amount of certain income components such as bank interest. As it levied mostly for security purposes Swiss taxpayers can reclaim the anticipatory tax in full. But why is it levied in the first place and how do you get your money back? We will answer these questions by explaining the anticipatory tax to you in 3 simple steps.

Verrechnungssteuer

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Taxes in Switzerland
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1. Anticipatory tax

The anticipatory tax is one of many Swiss taxes. It is levied on income from movable assets such as interest and dividends, winnings from money games, lotteries, games of skill for sales promotion and certain insurance benefits.

The purpose of the anticipatory tax is to encourage taxpayers to declare their income in their tax returns and to reduce tax evasion. It therefore has a security function.

The withholding tax amounts to 35 percent (15 percent on life annuities and pensions, 8 percent on other insurance benefits) of the respective investment income and is paid directly to the Federal Tax Administration (FTA) by the debtor of the taxable benefit

Example: Anna has a savings account that yields an interest of CHF 100 which is subject to withholding tax. The bank will pay Anna CHF 65 and transfer the remaining CHF 35 to the FTA.

2. Reclaiming the anticipatory tax

Taxpayers resident in Switzerland, i.e. individuals living and companies domiciled in Switzerland, may reclaim the anticipatory tax.

To do so, the recipient of the taxable income must apply for a refund of the anticipatory tax within three years. The easiest way to do this is to declare the taxed income and the associated tax deducted in the tax return.

Example: In order for Anna to recover the CHF 35 anticipatory tax, she lists her savings account and the tax in the relevent position on her tax return.

3. Refund of the anticipatory tax

The FTA checks whether all the requirements for a refund have been met. For example, it ensures that the person submitting the application is actually resident in Switzerland. If the conditions for a refund are met, the anticipatory tax deducted is repaid.

Note: For taxpayers resident abroad, the anticipatory tax is generally a definitive burden, unless a double taxation agreement with the taxpayer's country of residence allows for a refund.

Example: Anna did everything right and was allowed to reclaim the withholding tax. The deducted amount of CHF 35 is transferred to the account indicated in the tax return (as a rule, this happens within one month of the assessment). Now Anna has the whole CHF 100 interest at her disposal again.

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