Paying Dividends from a Swiss GmbH or AG: 35% Withholding Tax in Plain English

Your GmbH had a good year. The accounts are approved, and you'd like to pay yourself a dividend.

Here's the part that surprises many first-time founders: you can't just transfer the whole amount. Before the money reaches you, 35% goes to the Swiss Federal Tax Administration (ESTV) as withholding tax, the Verrechnungssteuer. And the company has 30 days to deal with it.

This guide explains how it works, what to file, and the one mistake that turns 35% into almost 54%.

What the Verrechnungssteuer is

The Verrechnungssteuer is a federal withholding tax of 35% on, among other things, dividends and other distributions of profit by Swiss companies (VStG Art. 4).

The company paying the dividend is the taxpayer. It pays 35% to the ESTV and pays the shareholder the remaining 65%. For Swiss-resident shareholders who declare the dividend properly, the tax is essentially a security deposit: they get it back through their tax return (individuals) or by a refund claim to the ESTV (companies). That's why it's called "Verrechnungs"-steuer, a tax you can set off.

Step 1: Check that you can pay a dividend at all

Swiss company law sets conditions before any dividend:

• Approved annual accounts. Dividends are resolved by the shareholders' meeting (general meeting of an AG, shareholders' meeting of a GmbH) on the basis of the approved annual accounts. If your company has an auditor, the audit report comes first.
• Distributable profit. Dividends can only be paid out of profit and reserves that are available for distribution (OR Art. 675 para. 2; for a GmbH, OR Art. 798 refers to the AG rules).
• Legal reserves. 5% of the annual profit must go to the legal retained earnings, after any loss carried forward has been covered, until the legal retained earnings and the legal capital reserve together reach 50% of the share capital registered in the commercial register (20% for holding companies) (OR Art. 672). For a GmbH, the AG rules on reserves apply (OR Art. 801).
• Interim dividends. Since 2023, companies can also pay interim dividends from the current year's profit based on interim accounts (OR Art. 675a). The interim accounts must normally be audited, unless the company has opted out of the limited audit, or all shareholders agree and creditors aren't put at risk.

Step 2: Do the 65/35 split

Say the shareholders resolve a gross dividend of CHF 100,000.

• Gross dividend resolved — Amount: CHF 100,000
• Withholding tax to the ESTV (35%) — Amount: CHF 35,000
• Net paid to shareholders (65%) — Amount: CHF 65,000

Pay the shareholders CHF 65,000 and the ESTV CHF 35,000.

Don't do this: resolve "a dividend of CHF 100,000" and transfer CHF 100,000 to the shareholder. The ESTV will treat the CHF 100,000 as the net amount and gross it up: CHF 100,000 ÷ 65% ≈ CHF 153,846, so the tax becomes about CHF 53,846, or about 53.85% of what you paid. The same gross-up applies to hidden profit distributions that the company doesn't recover from the shareholder.

Step 3: File and pay within 30 days

• AG: declare on Form 103 (dividends on shares).
• GmbH: declare on Form 110 (distributions on GmbH capital contributions).
• Deadline: within 30 days after the dividend falls due. The shareholders' meeting sets the due date; if it doesn't, it's the date of the meeting.
• How: online through the ESTV portal, or on the official paper form.
• Payment: in CHF, even if the company's share capital is in a foreign currency. (Companies with foreign-currency share capital can declare in that currency, but pay in CHF.)

Late payment triggers late-payment interest, which starts running 30 days after the due date.

Some companies must file every year, dividend or not

Some companies must submit Form 103 or 110 with their annual accounts within 30 days of the meeting that approved them, even with a dividend of CHF 0. Examples include companies with total assets above CHF 5 million at the balance sheet date and companies that claim a double tax treaty. Check with your Treuhänder whether this applies to you.

Step 4: Know the exceptions

Notification instead of payment

Within groups, where a Swiss company holds at least 10% of the distributing company, the 35% can often be reported instead of paid (notification procedure, Form 106 for Swiss recipients, together with Form 103 or 110). For foreign parent companies, a treaty-based notification procedure may be available with prior authorisation (Form 108, after an application on Forms 823, 823B or 823C). Miss the filing deadline and you may face an administrative fine.

Distributions from capital contribution reserves

Repayments of capital contribution reserves (Kapitaleinlagereserven, KER), meaning money shareholders paid into the company beyond share capital after 1996, can be free of withholding tax if the reserves are shown separately in the balance sheet and reported to the ESTV (VStG Art. 5 para. 1bis). They're reported on Form 170. If founders paid in a premium or extra capital, ask your Treuhänder whether you have KER.

Foreign shareholders

For shareholders outside Switzerland, the 35% is generally a final tax unless a double tax treaty applies. Under a treaty, part or all of it can usually be reclaimed from the ESTV, normally within three years after the end of the year in which the dividend fell due. Refunds can take several months, so plan for it.

Dividend or salary?

For owner-managers, the mix of salary and dividends is a tax decision with social-insurance effects. Salary carries AHV and other contributions; dividends don't, but they're paid out of taxed profits. One warning: if you pay yourself a very low salary and very high dividends, the AHV compensation office may requalify part of the dividends as salary and charge contributions on it. Work out the mix with your adviser. Background on social insurance: Hiring Your First Employee in Switzerland: The AHV Setup to Do Before Payday One.

A worked example (hypothetical)

A Lucerne consulting GmbH with two equal shareholders, both resident in Switzerland, approves its 2025 accounts at the shareholders' meeting on 15 May 2026. The meeting resolves a gross dividend of CHF 60,000, due on 31 May 2026.

1. Legal reserves are already above the required level, so no further allocation is needed.
2. Each shareholder is paid CHF 19,500 net (65% of CHF 30,000).
3. The GmbH files Form 110 through the ESTV portal and pays CHF 21,000 to the ESTV by 30 June 2026, within 30 days of the due date.
4. Each shareholder declares the CHF 30,000 gross dividend in their 2026 tax return and gets the CHF 10,500 withholding tax credited.

Common mistakes

1. Transferring the gross amount to the shareholder and forgetting the 35%. The tax is then grossed up to about 53.85%.
2. Missing the 30-day deadline. Interest starts running.
3. Paying without approved accounts or without enough distributable reserves.
4. Forgetting the legal reserve allocation.
5. Using the wrong form: Form 103 is for AGs, Form 110 for GmbHs.
6. Taking money out informally during the year. Private expenses paid by the company can be treated as hidden profit distributions, with the same 35% (or 53.85%) consequence.

Bottom line

A dividend is a two-payment transaction: 65% to shareholders, 35% to the ESTV, filed and paid within 30 days. Get the accounts approved, check the reserves, use the right form, and let your Treuhänder confirm the numbers before you press send.

FAQ

How much withholding tax is due on a Swiss dividend?

35% of the gross dividend (VStG Art. 4). The company pays it to the ESTV and pays shareholders the remaining 65%.

When is the withholding tax due?

Within 30 days after the dividend falls due. If the shareholders' meeting doesn't set a due date, the meeting date applies.

Which form does a GmbH use?

Form 110. An AG uses Form 103. Both can be filed through the ESTV portal.

Do Swiss shareholders get the 35% back?

Swiss-resident shareholders who declare the dividend correctly get the withholding tax back: individuals through their tax return, companies by a refund claim to the ESTV.

Are dividends from capital contribution reserves taxed?

Repayments of capital contribution reserves can be free of withholding tax if the conditions of VStG Art. 5 para. 1bis are met, including separate disclosure and reporting to the ESTV.

Pay the dividend, keep the record

With Firma, you pay the net dividend to shareholders from your CHF balance by SIC, and monthly statements help you reconcile your accounts with your Treuhänder. Money in is free. Every outgoing payment carries the plan fee (25 bps on Plus, 20 bps on Platform, custom on Enterprise), shown before you send. Conversions use the Reuters rate, and if an incoming payment is converted, there's no spread. Plus is Fr. 499 a month. Verification takes about two days, and if we can't verify your company, there's nothing to pay.

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Keeping enough cash for tax bills? Read How Much Cash Should a Swiss SME Keep? A Simple CHF Buffer Plan. Founder finances: 7 Money Mistakes Swiss Founders Make in Year One.

This article is general information, not legal, tax, or investment advice. Talk to a qualified adviser about your situation.

Firma is not a bank and is not licensed by FINMA. Firma Operations AG is a member of VQF, a FINMA-recognised self-regulatory organisation for anti-money-laundering, and does not hold client funds. Fiat payments are processed through partner banks. Balances are digital stablecoin tokens, not bank deposits, and are not covered by esisuisse.

Sources: Withholding Tax Act (VStG), Art. 4, 5 and 38; ESTV, declaring withholding tax; ESTV, forms; Swiss Code of Obligations, Art. 672, 675, 675a, 798 and 801; ESTV, withholding tax refunds; Firma.