Dividend simply explained: meaning, yield and tax

In short: A dividend is the part of a corporation’s profit that it pays out to its shareholders. The dividend yield sets the dividend per share in relation to the share price. In Switzerland, 35 percent withholding tax is deducted from every dividend paid by a Swiss company, which investors resident in Switzerland reclaim through their tax return.

Dividends look simple: the company pays, the money lands in your account. Behind that credit, though, sit a resolution by the general meeting, a cut-off date, a price adjustment, and a tax that is deducted first and refunded later. This article walks through each step.

The key facts at a glance

• Dividends may only be paid out of the balance sheet profit and reserves formed for this purpose (CO Art. 675 para. 2). They are set by the general meeting (CO Art. 698 para. 2 no. 4).
• 35 percent withholding tax is deducted from dividends paid by Swiss companies (VStG Art. 13 para. 1 let. a).
• Individuals resident in Switzerland when the dividend falls due are entitled to a refund (VStG Art. 22 para. 1). Anyone who fails to declare the dividend generally loses that entitlement (VStG Art. 23 para. 1).
• Dividends are taxable income (DBG Art. 20 para. 1 let. c). From a holding of 10 percent, they are taxable at 70 percent for federal tax (DBG Art. 20 para. 1bis) and at no less than 50 percent for cantonal tax; cantons may provide for a higher proportion (StHG Art. 7 para. 1).
• Repayments from capital contribution reserves are treated as a repayment of share capital, free of income tax (DBG Art. 20 para. 3) and withholding tax (VStG Art. 5 para. 1bis), with a special rule for listed companies.

What is a dividend?

A dividend is the part of a corporation’s profit that it pays out to its shareholders, as resolved by the general meeting. It is set per share and, in Switzerland, usually paid out once a year after the general meeting. There is no entitlement to it: whether and how much is distributed is decided anew by the general meeting every year.

The board of directors makes the proposal, but the general meeting must approve it (CO Art. 698 para. 2 no. 4). Only what is available in the balance sheet profit or in reserves formed for this purpose may be distributed (CO Art. 675 para. 2). Since the 2023 revision of Swiss company law, the general meeting can also resolve to pay an interim dividend based on interim financial statements (CO Art. 698 para. 2 no. 5).

The most common form is the cash dividend, a payment in francs. Less common are stock dividends, where shareholders receive additional shares, and scrip dividends, where they can choose between cash and shares. Dividends in kind, for example in the form of products, play almost no role for listed companies.

How do you calculate the dividend yield?

The dividend yield is the dividend per share divided by the current share price, multiplied by 100. A share trading at CHF 100 that pays a dividend of CHF 3 has a dividend yield of 3 percent. Because the share price moves every day, the figure changes even when the dividend itself stays the same.

Formula: Dividend yield in percent = dividend per share ÷ share price × 100

Worked example with withholding tax

An illustrative example, not a statement about any particular share: a person resident in Switzerland owns 100 shares of a Swiss company that pays a dividend of CHF 3 per share.

• Gross dividend: 100 × CHF 3 = CHF 300
• Withholding tax: 35 percent of CHF 300 = CHF 105, deducted directly
• Credited to the account: CHF 195
• In the tax return: CHF 300 is declared as income, and the CHF 105 is refunded or offset against the tax bill.

The dividend yield always uses the gross dividend. What actually arrives net, before the withholding tax flows back, is a good third lower for Swiss shares.

What the dividend yield does not show

A high dividend yield can have two causes: a high dividend, or a share price that has fallen. In the second case, it is often a sign that the market expects a cut. That is why it is worth also looking at the payout ratio, the share of profit per share that is paid out as a dividend. If it is above 100 percent, the company is paying out more than it earns and drawing on reserves.

Then there is the price adjustment on the ex-dividend date: the share price drops, in theory, by the amount of the dividend. The dividend is therefore part of the company’s value moving from the company to its shareholders, rather than extra income on top of the share price. When comparing two shares, what counts is the total return: price movement, which can be negative, plus distributions, not the dividend in isolation. Past dividends say nothing about whether the same amount will be paid out in future.

Who is entitled to the dividend, and when?

Whoever owns the share before the ex-dividend date is entitled to the dividend. From the ex-dividend date, the share trades without the current dividend, and it opens, in theory, lower by the amount of the dividend. Anyone who buys the share on or after the ex-dividend date does not receive the dividend for that financial year.

The process has three dates. On the ex-dividend date, shortly after the general meeting, trading without the dividend begins. On the record date, it is determined who holds the shares. On the payment date, the dividend is paid out and credited to the cash account linked to the custody account. Every company publishes the exact dates with the invitation to its general meeting.

Buying just before the ex-dividend date, in theory, brings no return on its own: anyone who buys the share shortly before pays for the dividend as part of the purchase price and gets it back after the price adjustment, minus the withholding tax, which only flows back with the tax return.

Which companies pay dividends?

Dividends are paid above all by established companies with stable profits, for example in the food, pharmaceutical or insurance sectors. Growth companies often forgo them and invest their profit in research, development or acquisitions. Neither is a quality signal on its own: a company without a dividend can still create value for shareholders through a rising share price.

Alongside the ordinary dividend, many Swiss companies also distribute capital contribution reserves. These are funds that shareholders previously contributed through capital increases or additional payments. For private investors in Switzerland, such a repayment is more favourable from a tax perspective, because it is treated as a repayment of share capital. More on this in the next section.

How are dividends taxed in Switzerland?

Dividends from Swiss companies are taxed at two stages, first as a safeguard and then as income. First, the company deducts 35 percent withholding tax (VStG Art. 13 para. 1 let. a). The investor then declares the full dividend as income in their tax return (DBG Art. 20 para. 1 let. c) and gets the withholding tax back.

Refund of the withholding tax: Individuals who were resident in Switzerland when the dividend fell due are entitled to a refund (VStG Art. 22 para. 1). The refund is claimed via the tax return. Anyone who fails to declare the dividend or the share forfeits the entitlement (VStG Art. 23 para. 1). If the omission was merely negligent and is corrected in an assessment, revision or supplementary tax procedure that is not yet final, the entitlement is preserved (VStG Art. 23 para. 2). For anyone who declares correctly, the withholding tax is therefore a safeguard that is refunded in full.

Qualified holdings: If someone holds at least 10 percent of a company’s share capital, the dividends are taxable at only 70 percent for federal tax (DBG Art. 20 para. 1bis). For cantonal tax the proportion is at least 50 percent, and cantons may provide for a higher proportion (StHG Art. 7 para. 1). Most private investors holding shares in listed companies do not reach this threshold.

Capital contribution reserves: Repayments from capital contributions that shareholders made after 31 December 1996 are treated as a repayment of share capital, provided the company reports them separately and notifies the ESTV. They are subject to neither income tax (DBG Art. 20 para. 3) nor withholding tax (VStG Art. 5 para. 1bis). A special rule applies to companies listed on a Swiss stock exchange: if they do not distribute at least the same amount in other reserves, part of the repayment becomes subject to both income tax and withholding tax (DBG Art. 20 para. 4, VStG Art. 5 para. 1ter).

Foreign dividends: Dividends from foreign companies are usually subject to a separate withholding tax levied by the country of origin. Double taxation agreements limit this deduction, and part of it can be reclaimed or credited in Switzerland. How much deduction remains depends on the relevant agreement. Further notes on taxes when investing are covered in the article Saving taxes in Switzerland: optimally structuring investments.

How do funds and ETFs handle dividends?

Funds and ETFs receive the dividends from the shares they hold and pass them on in two ways. Distributing funds pay the income out to unit holders regularly. Accumulating funds reinvest it, so the value of each unit rises accordingly. How ETFs are structured and what sets them apart is explained in the article What Are ETFs?.

What matters for fitting dividends into an investment strategy is whether regular payouts are needed or whether the income should be reinvested. How an income-focused strategy is structured is described in the article Investment Strategy in Focus: The Power of Income Strategy.

Frequently asked questions about dividends

What is the dividend yield?

The dividend yield is the dividend per share divided by the current share price, multiplied by 100. If a share trading at CHF 100 pays a dividend of CHF 3, the dividend yield is 3 percent. Because the share price moves every day, the figure changes even when the dividend itself stays the same.

When is the dividend paid out in Switzerland?

The general meeting sets the dividend, usually once a year after the financial statements are closed (CO Art. 698 para. 2 no. 4). It is paid out a few days after the general meeting. Since 2023, the general meeting can also resolve to pay an interim dividend.

Who receives the dividend?

Whoever owns the share before the ex-dividend date. From the ex-dividend date, the share trades without the current dividend, and the price is reduced, in theory, by the amount of the dividend. Anyone who buys the share on or after the ex-dividend date does not receive the dividend for that year.

How high is the withholding tax on dividends?

35 percent on dividends from Swiss companies (VStG Art. 13 para. 1 let. a). Individuals resident in Switzerland when the dividend falls due can reclaim it (VStG Art. 22 para. 1), provided the dividend is declared in the tax return. Anyone who fails to declare it generally loses that entitlement (VStG Art. 23 para. 1).

Are distributions from capital contribution reserves tax-free?

In principle yes, for private investors in Switzerland. Repayments from capital contribution reserves that the company reports separately and notifies to the ESTV are treated as a repayment of share capital, so they are free of income tax (DBG Art. 20 para. 3) and withholding tax (VStG Art. 5 para. 1bis). For companies listed on a Swiss stock exchange, part of the repayment may nevertheless be subject to both taxes (DBG Art. 20 para. 4, VStG Art. 5 para. 1ter).

As of September 2026. Sources: CO (SR 220) Art. 675 and 698, VStG (SR 642.21) Art. 5, 13, 22 and 23, DBG (SR 642.11) Art. 20, StHG (SR 642.14) Art. 7.