Dividends in Switzerland: distribution and taxation
A dividend is a distribution a company decides to make to its shareholders. For a Swiss SME, payment involves three separate questions: is there a legally distributable amount, is sufficient cash available, and how will the distribution be taxed?
These questions go beyond the 35% withholding tax rate. The withholding applies on distribution but generally does not equal the recipient’s final tax liability. This guide separates the steps for a Swiss corporation or LLC from the rules for the recipient.
By Sarah Prieur · Swiss certified accountant
Key points to remember
- Check distributable funds and reserves before deciding an amount.
- You need a documented decision and sufficient cash.
- The 35% withholding tax is separate from final income or profit tax.
- Refunds, partial taxation and intragroup notification follow different rules.
- Record the accounts approval date and dividend due date separately.
What is a dividend?
A dividend rewards ownership of capital. In a corporation it goes to shareholders; in an LLC, to its members. It may come from balance-sheet profit or available reserves established for that purpose. It is neither salary for work nor automatic repayment of invested money.
The company and its owner are separate taxpayers. Profit is first taxed in the company. Distribution may then create tax for the recipient: economic double taxation, mitigated in some situations by specific mechanisms.
A sole proprietorship does not distribute dividends in this sense: the owner’s withdrawals are not corporate or LLC distributions.
What conditions must be met before a distribution?
1. Establish genuinely distributable profit
The bank balance is insufficient. Start with reliable accounts, include corporate taxes and assess carried-forward losses, reserves and legal or statutory restrictions. Accounting profit may include customer invoices still unpaid.
Conversely, a company may have distributable reserves from earlier years despite a weak current-year result. No current-year profit does not alone prohibit all distributions. Assess equity composition and any losses before setting the amount.
2. Allocate the required reserves
Corporation law requires 5% of annual profit to be allocated to the statutory retained earnings reserve after offsetting any loss carry-forward. Allocation continues until that reserve and the statutory capital reserve together reach half the registered share capital. The threshold is 20% for companies whose main purpose is holding interests in other businesses.
The articles and non-distributable reserves must also be respected. Corporate reserve rules apply by analogy to LLCs. The additional reserve allocation linked to “superdividends” was removed under revised law effective in 2023.
These percentages protect equity: they are neither tax rates nor an obligation to distribute the remainder. See the Confederation’s SME Portal explanation.
3. Adopt and document the decision
The general meeting decides a corporation’s distribution; the members’ meeting decides an LLC’s. The records must identify approved accounts, allocation of profit, gross distribution and due date.
Keep minutes with accounting and tax records. This remains necessary for a single-owner company: a transfer to a personal account does not replace a distribution decision.
4. Preserve the ability to pay obligations
A legally possible dividend is not necessarily advisable. Before payment, prepare a cash-flow plan covering salaries, suppliers, VAT, taxes, loan repayments and investment. Include withholding tax under the ordinary procedure.
Being able to pay today is not enough: the distribution must not prevent the company meeting commitments. Where there are losses, cash pressure or financial difficulties, have the position reviewed before deciding or paying.
What timetable applies to dividends?
Two dates need particular attention: approval of the accounts and the distribution due date. They must not be confused.
| Stage | Required action | Point to watch |
|---|---|---|
| Prepare accounts | Establish distributable funds and reserves | Include losses and corporate taxes |
| Meeting decision | Approve the allocation, gross dividend and due date | Retain minutes consistent with the accounts |
| After accounts approval | Send accounts and the prescribed declaration to the FTA where required | 30 days after approval, notably for taxable distributions |
| On the dividend due date | Recognise the distribution and deduct withholding tax unless an approved procedure applies | Tax treatment does not depend simply on the chosen bank transfer date |
| After the due date | Pay withholding tax or complete the applicable notification procedure | 30 days after the distribution falls due |
| At recipient level | Declare the income and request any refund | Do not declare only the net cash received |
The FTA explains company reporting obligations. The procedure depends on legal form, recipient and any group structure. Use current official forms or services rather than an old template in your records.
How should the distribution be recorded?
The allocation decision reduces available profits or reserves and creates a dividend payable. Under the ordinary procedure, separate the net amount owed to the recipient from withholding tax owed to the FTA, then clear them on payment. Dividends are not deductible operating expenses.
35% withholding tax: withholding and final tax differ
Under the ordinary procedure, the Swiss company deducts 35% of the taxable dividend and pays the balance to the recipient. It is responsible for its obligations to the FTA.
Simplified example for a CHF 10,000 gross dividend:
| Cash flow | Amount |
|---|---|
| Gross dividend approved | CHF 10,000 |
| Withholding tax deducted | CHF 3,500 |
| Net payment to the recipient | CHF 6,500 |
The company’s total cash outflow is CHF 10,000: part goes to the recipient and part to the FTA. The CHF 3,500 is not automatically final tax for the recipient. It may be refunded or credited if the conditions are met.
Final tax depends on the recipient’s tax circumstances. For an individual, the dividend enters taxable income under applicable rules; canton, municipality, other income and personal circumstances affect the result. The 35% rate alone cannot compare remuneration options.
The safeguard role of withholding is explained by the Federal Tax Administration.
How do you recover withholding tax?
Individuals resident in Switzerland
Apply to the competent cantonal tax authority. A refund requires, among other conditions, correct declaration of the income and corresponding assets. For a CHF 10,000 gross dividend with CHF 6,500 received, the cash received is not the gross income to report.
Refunds often take the form of a credit against cantonal and communal taxes. This does not eliminate income tax on the dividend; it removes the safeguard withholding where conditions are met.
Legal entities based in Switzerland
Applications go to the FTA. The income must, among other conditions, be properly recorded. Recovery of withholding tax is distinct from calculating the recipient company’s profit tax.
Watch the deadline
The refund right generally expires if no application is made within three years after the end of the calendar year in which the distribution fell due. For a distribution due in 2026, the deadline is generally 31 December 2029. Substantive conditions still apply: meeting the deadline alone does not create entitlement.
Procedures and special cases are covered on the official page for withholding tax refunds.
Can notification replace payment?
A notification procedure can replace withholding tax payment for certain intragroup distributions. It is not an unrestricted option for every shareholder.
Since 2023, this group procedure has a 10% participation threshold and has been extended to legal entities. For domestic cases, refund entitlement must not be doubtful. Check substantive conditions, the precise recipient and formalities before omitting deduction and payment.
International cases require assessment of prior authorisation and treaty rules. The international authorisation under this arrangement lasts five years. The required request or notification remains due within 30 days after the dividend falls due. Late notification may be penalised even if substantive conditions are met.
How is the recipient taxed?
Privately held participations
For direct federal tax, dividends on qualifying private holdings are 70% taxable where ownership reaches at least 10% of share capital. The threshold is “at least 10%”, not “more than 10%”.
For a qualifying CHF 10,000 gross dividend, CHF 7,000 enters the federal taxable income base. That means neither CHF 7,000 in tax nor a 70% tax rate. Tax is then calculated using the overall circumstances. This relief does not apply below the required ownership threshold.
Cantons set their own taxable fractions. Geneva uses 70% for qualifying private holdings and 60% for business holdings. Do not automatically apply these figures elsewhere or confuse private with business assets. Sources: FTA Circular 22a and Geneva rules.
Dividends received by a company
The recipient company records investment income. Participation relief may reduce profit tax if conditions are met: notably at least 10% of capital, entitlement to at least 10% of profits and reserves, or participation rights with a market value of at least CHF 1 million.
The calculation compares net participation income with total net profit, including relevant costs and adjustments. It is not a universal exemption for every holding company’s dividends. Disposal gains follow different rules from distributions. See FTA Circular 27.
Recipients resident abroad
Foreign residence does not automatically remove Swiss withholding tax. Any refund or relief depends on the double taxation treaty, recipient status and required evidence. Part of the withholding may remain with Switzerland.
Tax in the country of residence must be assessed separately. Do not use cross-border employee rules to determine dividend treatment. The FTA provides refund forms by country.
Dividends or salary: a separate decision
Dividends reward capital, while salary rewards work. For an active director, assess appropriate pay, social contributions, pensions and the combined taxation of company and individual. Dividends cannot freely replace all remuneration. Read our guide to salary or dividends in Switzerland.
Frequently asked questions
Can you distribute all annual profit?
Not automatically. Consider losses, statutory reserves, the articles, approved accounts and financial position. The company may also retain part of the profit to fund operations.
Can a company pay a dividend during the year?
Yes. The law allows interim dividends based on interim accounts and a meeting decision. An auditor’s review is generally required, subject to statutory exceptions. An informal advance to the owner is not automatically a valid interim dividend.
Does 10% ownership mean you can avoid the 35% withholding?
No. The 10% threshold appears in several separate mechanisms. Partial taxation for a private individual does not exempt the company from withholding. The group notification procedure has its own conditions.
Must you hold shares for one year to qualify for partial dividend taxation?
The federal rule for dividends on private holdings has no general one-year minimum. Do not confuse it with conditions for certain disposal gains. The ownership threshold and timing of income recognition still need checking.
Is repayment of a contribution a dividend?
Not necessarily. Repayment of nominal capital or capital contribution reserves may receive different treatment. Accounting classification, tax recognition and repayment conditions determine the outcome, not the bank transfer description.
Which documents should you prepare for a distribution review?
Gather recent accounts, equity details, articles, ownership allocation, the proposed decision, intended due date and cash-flow plan. Include recipients’ tax identities and distributions already made during the year.
Plan a suitable distribution
Before approving a dividend, review the distributable amount, cash after payment, FTA formalities and recipient taxation together. This helps distinguish apparent tax savings from a distribution that actually suits your business.
Sarah and the Karpeo team can assess the work your case needs: accounts, profit allocation, decisions and reporting obligations.
Swiss dividends: video in French
About the author
Sarah Prieur
A Swiss certified accountant and partner at Karpeo, Sarah specialises in tax and VAT. She supports SMEs, self-employed professionals and entrepreneurs with tax obligations and decisions.
Registration, method selection, input tax recovery and cross-border transactions are among her areas of work. She also supervises the operations team and the quality of accounting, tax and payroll files.
Before Karpeo, she spent eight years in audit at PwC Switzerland, progressing to manager.
Explore Sarah’s background →