Distribution of Dividends: How can You Benefit from the Notification Procedure?
By Sandrine Debétaz, Bonnefous & Cie S.A.
Are you a foreign company holding a significant interest in a Swiss company? Manage your cash flow in the event of dividend distribution by submitting a request to the Swiss Federal Tax authority (SFTA) to benefit from the notification procedure rather than paying withholding tax!
Notification Procedure: How It Works
If a foreign company holds a significant interest in your Swiss company, you can submit a request to the Swiss Federal Tax Administration (SFTA) to use the “notification procedure”, provided that the foreign company is resident of a country with which Switzerland has signed a double-taxation treaty or is part of the European Union (in accordance with Article 9 of the agreement between Switzerland and the EU on the automatic exchange of information in tax matters [AEOI]).
The request must prove that the foreign company receiving dividends is authorised to benefit from the double-taxation treaty and that it holds the minimum necessary shares in accordance with this agreement. Therefore, the information regarding the tax status of the foreign company must be confirmed by the relevant foreign tax authorities.
Based on this procedure, the foreign parent company can directly benefit from the reduced withholding tax rate, or a withholding tax exemption provided by the applicable doubletaxation treaty, or Article 9 of the AEOI. By doing so, it is no longer necessary to pay the 35% Swiss withholding tax and then to request a subsequent reimbursement.
Notification Procedure: What’s Next?
If you receive the approval of the notification procedure from the SFTA, this approval is valid for a period of three years, renewable after a new request.
At the time of dividend distribution, the Swiss company will pay the dividend amount determined by the general meeting, less the residual withholding tax amount provided by the applicable double-taxation treaty.
If the applicable double-taxation treaty contains a special provision on tax relief in case the beneficial owner of the dividend is a company which directly hold a significant percentage of the capital of the company paying the dividend, the Swiss company will be able to pay the full dividend amount (without withholding tax) to the foreign company, either by payment, transfer, credit, or accounting record.
The Swiss company paying the dividends spontaneously declares the dividend payment to the FTA by filing the relevant forms.
Sandrine DebétazGGI member firm
Bonnefous & Cie S.A.
Advisory, Auditing and Accounting, Corporate Finance, Law Firm Services, Tax
T: +41 22 906 11 77
Published: GGI Insider, No. 111, January 2021 l Photo: Bruchez Benoît - stock.adobe.com