US and Switzerland sign MoU on eligibility to reclaim Swiss withholding tax on dividends for individual retirement savings plans

The MoU was signed following the amendment of the Double Tax Treaty between the United States and Switzerland (“DTT US-CH”) in 2019, which, among others, introduced a privileged withholding tax treatment for individual retirement savings plans into Article 10 Paragraph 3 of the DTT (previously, this provision had only covered institutional pension or retirement arrangements). Article 10 Paragraph 3 DTT US-CH provides for a full refund of Swiss withholding tax levied on dividends distributed to US pension and retirement arrangements (both institutional and individual).

Eligibility criteria for US individual retirement savings plans for full refund of Swiss withholding tax

With the now signed MoU, the US and Switzerland have mutually agreed upon what arrangements qualify as “individual retirement savings plan” in the sense of the DTT. The following qualified US individual retirements savings plan may now be eligible for a full refund of Swiss withholding tax:

a)    A trust that is an individual retirement account under Code section 408(a) or an annuity or endowment contract that is an individual retirement annuity under Code section 408(b);
b)    A Roth individual retirement account under Code section 408A;
c)    A simple retirement account under Code section 408(p); and
d)    A trust providing pension or retirement benefits under a simplified employee pension plan under Code section 408(k).

Further, the MoU-section defining eligible qualified US pension or other retirement arrangements was updated as follows (amendments compared to the MoU from 2004 in bold):

a)    A trust providing pension or retirement benefits under a Code section 401(a) qualified pension plan (which includes a Code section 401(k) plan) and a profit sharing or stock bonus plan;
b)    A trust described in Code section 457(g) providing pension or retirement benefits under a Code section 457(b) plan;
c)    A Code section 403(a) qualified annuity plan and a Code section 403(b) plan;
d)    A group trust described in IRS Revenue Ruling 81-100 (as amended by IRS Revenue Ruling 2014-24 and IRS Revenue Ruling 2011-1) (U.S. Group Trust), provided that it is operated exclusively or almost exclusively to earn income for the benefit of pension funds that are themselves entitled to benefits under the Treaty as a resident of the United States; and
e)    The Thrift Savings Fund (Code section 7701(j)).

The above lists are not exclusive. Any US pension or other retirement arrangement, or individual retirement savings plan, not mentioned above, including any such arrangement or plan established pursuant to legislation enacted after the date of signature of the MoU may present its case to the US and Swiss authorities to determine whether it qualifies for as pension or retirement arrangement under Article 10 Paragraph 3 DTT US-CH.

Deadlines for reclaiming Swiss withholding tax

The updated provisions are applicable for dividends paid on or after 1 January 2020. The deadline to reclaim Swiss withholding tax is three years after the end of the calendar year in which a dividend that suffered Swiss withholding tax was paid. Accordingly, the deadline to reclaim withholding tax levied in 2020 and 2021 has already elapsed, and the request to reclaim withholding tax levied on dividends paid in 2022 must be filed by the end of 2025.

Forvis Mazars has extensive experience in reclaiming Swiss withholding tax for all kinds of investors in Swiss shares, including retirement arrangements. If you need support in determining whether you are eligible for a refund of Swiss withholding tax or in reclaiming Swiss withholding tax, please reach out to us.

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Article written by André Kuhn, Yann Waeber and Steven Gruendel