News flash – Withholding tax

Changes to the notification procedure within a group of companies - Effective from 1 January 2023

On January 1st 2023, came into effect some changes related to the notification procedure for reporting withholding tax within a corporate group. 

As a reminder and in accordance with the provisions of the Ordinance on Withholding Tax (OIA), corporations and cooperative entities domiciled in Switzerland with a balance sheet total of more than five million Swiss francs are required to submit an official form to the Federal Tax Administration (FTA) within 30 days after the approval of the annual accounts (Annual General Meeting). The annual report and a signed copy of the annual accounts (balance sheet and profit and loss statements) must be attached to the form. In case of a dividend distribution, companies are also required to submit an official form within 30 days after the issuance date of the dividend (unless otherwise stated, this is the date of the AGM by default). In addition, the 35% withholding tax must be paid within the same period to the Federal Tax Administration (hereinafter: "FTA"). In case of late payment, late interests will be charged by the FTA. At the end of the calendar year, the effective beneficiary of the said dividend may request a refund, totally or partially, from the FTA trough an official form.

Under Swiss law, however, exists the so-called “notification procedure”. This procedure makes it possible to avoid the actual payment (totally or partially) of the 35% withholding tax and thus, at the end, the long process of obtaining its reimbursement. In practice, a distinction must be made between the notification procedure for a dividend distribution within a group towards an effective beneficiary located in Switzerland or abroad. The conditions for obtaining the notification procedure for a company located abroad are stricter and subject to approval by the FTA. Indeed, to get such notification procedure, it is necessary that the foreign company received an authorisation from the FTA after having filed an advanced tax ruling. This advanced tax ruling must be accompanied by an official form (F823), which must also be approved by the tax authorities of the place where the beneficial owner of the dividend is based. Based on our experience, obtaining such approval can take few months. Thus, good internal planning is important in order to benefit from the notification procedure. In addition, for any change in shareholding structure or significant change within the fact pattern , a new application must be filed to the FTA.

Once the notification procedure has been authorised, the Swiss company distributing the dividend must always announce the distribution of the dividend through the basic form in all cases (beneficiary company in Switzerland or abroad). In addition, it must simultaneously attach a second official form to the basic official form to inform the FTA that the notification procedure has been applied.

Since January 1st 2023, the following changes came into effect:

• Notification procedure within a Swiss group of companies 
  • It is now applicable from a holding level of 10% (instead of 20% previously)
  • The scope of application is extended to all legal persons, i.e. including foundations and associations with a qualifying holding of more than 10%.
• Notification procedure within a foreign group of companies 
  •  In the international context, the foreign company receiving the dividend must hold at least 10% of the capital of the Swiss company paying the dividend. If the relevant double taxation agreement contains a different minimum holding requirement, the latter must apply.
  •  Since FTA’s approval for the notification procedure’s application, the replacement of the withholding tax payment is now valid for a period of 5 years (instead of 3 years previously). Of course, in the event of a change in the shareholding structure or significant change within the fact pattern, a new application must be filed with the FTA.

ATTENTION: for any request filed to the FTA before and including 31 December 2022, the old law still applies. The decisive date of filing of the application as a criterion for the application of the old or new law is the date of the postmark.