Swiss Tax Alert - April 2017: Amendment of the Withholding Tax Notification Procedure

Refund of default interest paid

The amendment of the Federal Law of 13 October 1965 on Withholding Tax (LWT) entered into force on 15 February 2017.

Henceforth, those companies that are likely to benefit from the notification procedure for taxable dividend, instead of paying withholding tax at the rate of 35% and subsequently claiming a refund, will no longer be required to pay default interest of 5% p.a. due to late reporting of the taxable dividend, i.e. after expiry of the 30-day legal deadline. It is nevertheless essential that the substantive conditions are fulfilled in order to benefit from the aforementioned procedure. The Federal Tax Administration (FTA) would only be able to impose a maximum penalty of CHF 5,000 for failure to comply with the administrative deadline.

This new regime applies with retroactive effect so that companies that have had to pay default interest in the past due to late reporting of taxable dividend, even though the aforementioned substantive conditions were fulfilled, will be able to claim a refund from the FTA. The claim for a refund must be submitted within one year commencing from 15 February 2017.


Non-application of the notification procedure due to late reporting of the taxable dividend

Following a case law by the Federal Court (FC) in 2011[1] , in which the FC had prescribed a 30-day forfeiture deadline for reporting the dividend distribution, the FTA tightened its practice. In fact, if the dividend distribution was reported after this deadline the FTA would refuse to apply the notification procedure, even if the substantive conditions for its application had been fulfilled, thereby obliging (i) the debtor to actually pay the FTA the amount of withholding tax due on the dividend distribution concerned, and (ii) its beneficiary to apply for a refund of the withholding tax charged.

No refund of default interest

In addition to the refusal by the FTA to apply the notification procedure on the grounds of late reporting of the taxable dividend, thereby requiring the debtor to pay withholding tax of 35%, the debtor also had to pay default interest of 5% p.a.[2] , with no possibility of a refund, despite fulfilling the substantive conditions for the application of the notification procedure.



Amendment of the Withholding Tax Law and its retroactive effect

From 15 February 2017 onwards, the notification procedure will apply even if the taxable dividend is reported late provided the substantive conditions are fulfilled. The new Article 16 paragraph 2bis LWT also stipulates that no default interest will be payable. However, a maximum penalty of CHF 5,000 will be imposed for late reporting from now on pursuant to the penalty provision incorporated into Article 64 LWT for failure to observe the administrative deadline..

The new Article 70c LWT grants retroactive effect to the new Article 16 paragraph 2bis LWT. The latter is accordingly applicable “to facts that did not exist prior to the entry into force of the [legislative] amendment of 30 September 2016”[3] except in cases where the tax claim or the default interest claim is statute barred or did not enter into force before 1 January 2011[4] .

Type of default interest

A distinction will have to be made between cases in which default interest has been charged but not paid and those cases in which it has been paid.

When it has been paid, it is possible to claim a refund “with no remunerative interest upon presentation of a claim to the FTA”[5] . As stated in its communication of 1 February 2017, the FTA has implemented a procedure that is specifically designed for this purpose.

A claim for a refund by a taxpayer may be submitted in a variety of contexts, depending on the action taken by the taxpayer. In fact, a claim for a refund may be submitted (i) if no proceedings are pending, (ii) if proceedings are pending at the Federal Tax Administration and (iii) if proceedings are pending before the Federal Administrative Court (FAC) / Federal Court (FC).

A taxpayer who has not paid the default interest charged by the FTA does not need to take any specific action himself, regardless of the facts of the matter. The FTA will officially cancel the notified default interest and will send the taxpayer concerned a confirmation letter as soon as the case is settled.

The situations described above are summarised in the following table:


As the retroactive effect is set forth in a transitional provision (Article 70c LWT), it is important for taxpayers who require a refund of the default interest paid to meet the statutory deadline.

Any claims for a refund must be submitted during the year after the entry into force of the legislative amendment of 30 September 2016.

As the legislative amendment entered into force on 15 February 2017, the one-year deadline for claiming a refund will expire on 15 February 2018. It is emphasised that the claim for a refund from the FTA must be made on the official form (Form 1 RVZ) that is available on the website of this authority[6] and that the taxpaying company is responsible for providing proof of dispatch of the claim for a refund within the specified deadline[7] .


Intra-group payment of dividends is standard practice, whether by SMEs or large corporations, and this is why to date many companies domiciled in Switzerland have, for the sake of efficiency, opted for the notification procedure instead of paying the withholding tax.

The FTA subsequently tightened its practice which resulted in a considerable number of these companies having to pay default interest as they had failed to

meet the filing deadline for the taxable dividend  and were unable to reclaim the interest, despite fulfilling the substantive conditions for the application of the notification procedure.


As a result of the legislative amendment of 30 September 2016 which entered into force on 15 February 2017, the taxpayers concerned will now be able to obtain a refund of these amounts subject to the following conditions:


  • default interest has actually been paid;
  • claims are not statute barred and entered into force after 1 January 2012;
  • the claim for a refund is submitted no later than 15 February 2018 using the official form;
  •  the substantive conditions for the application of a notification procedure are fulfilled.


However, the aforementioned conditions do not cover the refund of “interest paid on any residual tax”[8] .

The legislative amendment thus has a corrective function and by no means gives companies new benefits.

[1] 2C_756/2010

[2] The dies a quo for calculating the default interest of 5% p.a. corresponds to the 31st day after expiry of the taxable income and the dies ad quem corresponds to the date of payment of the withholding tax.

[3] RS 642.21 – Article 70c par. 1 LWT

[4] It should be noted that the retroactive effect could date back to 1 January 2012 instead of 1 January 2011 as specified in the new Article 70c LWT, taking account of the 5-year limitation period.

[5] RS 642.21 – Article 70c par. 2 LWT


[7] Burden of proof; Article 8 of the Swiss Civil Code

[8] Communication 004-DVS-2017-f of 01.02.2017 - Refund of default interest on withholding tax