Dividends, interest and royalties under the convention

The three rates and the domestic starting points

Articles 10, 11 and 12 follow the same pattern. The state of residence of the recipient may tax the income without limit. The source state may also tax it, but its tax may not exceed a fixed percentage. Under Article 10 paragraph 2 the tax on dividends in the source state may not exceed 15 per cent of the gross amount of the dividends. Under Article 11 paragraph 2 the tax on interest may not exceed 12.5 per cent of the amount of the interest. Under Article 12 paragraph 2 the tax on royalties may not exceed 5 per cent of their gross amount.¹ Unlike modern Swiss treaties, the convention contains no reduced rate for substantial participations and no exemption for interest paid to banks or on government bonds. These features explain why the intra-group exemption under the agreement between Switzerland and the European Union, discussed in the next section, has become so important.

The treaty rates must be read against the domestic withholding taxes. In Switzerland the federal withholding tax (imposta preventiva, Verrechnungssteuer) is levied at 35 per cent on dividends of Swiss companies, on interest on bonds and similar debt instruments and on interest on customer deposits with Swiss banks.² Interest on ordinary loans between companies or between individuals and companies is not subject to it, and Switzerland levies no withholding tax on royalties or service fees. In Italy, dividends paid to non-residents are subject to a final withholding tax of 26 per cent under Article 27 paragraph 3 of Presidential Decree No. 600 of 29 September 1973.³ Interest paid to non-residents on loans is generally subject to 26 per cent under Article 26 paragraph 5 of the same decree, although Italian law exempts interest on government bonds and on many listed bonds paid to residents of states that exchange information with Italy, Switzerland included.⁴ Royalties paid to non-resident companies are subject to 30 per cent on 75 per cent of their amount, an effective rate of 22.5 per cent.⁵

Income Domestic Convention EU agreement (Art. 9) source tax Swiss dividends 35 % 15 % 0 % (25 %, 2 years) Italian dividends 26 % 15 % 0 % (25 %, 2 years) Swiss bond and 35 % 12.5 % 0 % (associated deposit interest companies) Italian loan interest 26 % 12.5 % 0 % (associated companies) Italian royalties 22.5 % 5 % 0 % (associated effective companies) Swiss royalties none – –

Table 2: Withholding taxes between Switzerland and Italy. Sources as cited in the text.

Notes

1. Convention, Art. 10 para. 2 ("non può eccedere il 15 per cento dell'ammontare lordo dei dividendi"), Art. 11 para. 2 ("non può eccedere il 12,5 per cento dell'ammontare degli interessi") and Art. 12 para. 2 ("non può eccedere il 5 per cento dell'ammontare lordo dei canoni"), text at https://www.wikilabour.it/wp-content/uploads/2023/07/1978_svizzera-it.pdf. ↩
2. Federal Act on Withholding Tax of 13 October 1965 (WHTA, VStG), SR 642.21, Art. 4 para. 1 lit. a, b and d, Art. 5 para. 1 lit. c (interest on customer deposits not exceeding CHF 200 per calendar year) and Art. 13 para. 1 lit. a (35 per cent), https://www.droit-bilingue.ch/de-it/6/64/642.21-4-7.html, https://www.droit-bilingue.ch/de-it/6/64/642.21-5-9.html and https://www.droit-bilingue.ch/de-it/6/64/642.21-13-17.html. ↩
3. Federico Migliorini, "Dividendi percepiti da soggetti non residenti", Fiscomania, 8 October 2025, https://fiscomania.com/dividendi-percepiti-da-soggetti-non-residenti (26 per cent under Art. 27 para. 3 of Presidential Decree No. 600 of 1973). ↩
4. Presidential Decree No. 600 of 1973, Art. 26 para. 5 (withholding on capital income of non-residents as final tax, stated at 12.5 per cent in the text and raised to 26 per cent by Decree-Law No. 66 of 2014, Art. 3; Agenzia delle Entrate, Circular No. 19/E of 27 June 2014) and para. 5-bis, Brocardi.it, https://brocardi.it/disposizioni-accertamento-imposte-redditi/titolo-iii/art26.html; Art. 26-bis (exemption for non-residents meeting the conditions of Legislative Decree No. 239 of 1 April 1996, Art. 6), https://brocardi.it/disposizioni-accertamento-imposte-redditi/titolo-iii/ art26bis.html; Arletti & Partners, "Trattamento fiscale degli interessi dei buoni postali fruttiferi percepiti da un soggetto non residente", 2026, https://arlettipartners.com/it/trattamento-fiscale-degli-interessi-dei-buoni-postali-fruttiferi-percepiti-da-un-soggetto-non-residente-residenza-continuativa-in-un-paese-white-list-articolo-6-decreto-legislativ/ (Switzerland on the white list under the Ministerial Decree of 4 September 1996 since 2016; Agenzia delle Entrate, Risposta No. 148 of 2026). ↩
5. Federico Migliorini, "Royalties in uscita verso la Svizzera", Fiscomania, 6 May 2026, https://fiscomania.com/royalties-in-uscita-verso-la-svizzera (30 per cent on 75 per cent of the gross amount, Art. 25 para. 4 of Presidential Decree No. 600 of 1973, effective rate 22.5 per cent). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.