How can double taxation between Switzerland and Hungary be avoided?

Who is considered a Swiss tax resident, and who is subject to Quellensteuer?

The detailed criteria for Swiss tax residence must be assessed based on the individual’s circumstances, actual place of residence and the applicable tax-law rules. However, Swiss withholding tax deducted from salary (Quellensteuer, QST) applies to foreign employees living in Switzerland who do not hold a C settlement permit (Ausweis C), as well as to cross-border commuters living abroad (Grenzgänger).

When it comes to double taxation, it is not sufficient to rely solely on whether a person is a Hungarian citizen or holds a Swiss residence permit (Ausländerausweis). Citizenship, place of work, the family’s place of residence, property ownership and the centre of life are not synonymous with tax residence.

The article distinguishes between two deductions that are often confused in practice:

The two types of tax involve different documents, authorities and administrative procedures. QST withheld from employment income is not a “refundable 35% share tax”, and VSt is not the monthly payroll deduction made by a Swiss employer.

Who may be affected by Swiss withholding tax deducted from employment income?

According to the rule verified in the dossier, QST affects the following groups of employees in particular:

1. Foreign employees living in Switzerland without a C permit: the employer may withhold tax at source from the salary of a foreign employee residing in Switzerland but without an Ausweis C permit.

1. Cross-border commuters residing abroad : for Grenzgänger employees, the place of residence is outside Switzerland while they work in Switzerland.Employees assigned a tariff code:

1. the amount withheld is determined not solely by the level of salary, but also, among other factors, by the QST tariff code applied.

As a Hungarian citizen, a particularly common situation is that the individual initially works in Switzerland, while later part of the family remains in Hungary, or investments and bank accounts in Hungary are retained. In such cases, questions concerning salary taxation, investment income and tax filing obligations in both countries should not be grouped together under a single category of “Swiss tax”.

Why does Swiss withholding tax deducted from salary vary by canton?

The rate of Swiss Quellensteuer varies by canton and tariff code because the deduction also includes cantonal, municipal and church tax components. Therefore, there is no single QST rate applicable throughout Switzerland.

Withholding tax tariffs use codes linked to family and household circumstances. The tariff codes identified in the dossier are the A, B, C and H categories. Which tariff applies to an employee depends on the specific circumstances and the rules of the canton.

According to an illustrative example for 2026, even for an employee in the same circumstances—single, without children, subject to Tariff A and earning a gross annual income of 80 000 CHF—the amount of withholding tax may differ from canton to canton. This difference is not an administrative error, but a consequence of the cantonal and municipal structure of the Swiss tax system.

Why is it not advisable to use a nationwide QST percentage?

A national average or a calculator for another canton may be misleading. The amount withheld may depend, among other things, on:

• the relevant canton based on the employee’s place of residence or place of work;

• the QST tariff code applied;

• marital status and the classification relating to children;

• whether the tariff also includes cantonal, municipal and church components.

The cantons of Zürich and Valais/Wallis, for example, publish their own withholding tax tariffs and reference tables. When signing an employment contract or planning a move, the official QST tariff of the canton actually concerned is therefore the relevant starting point.

For Hungarian readers, an additional risk is that the Hungarian place of residence, Swiss registration and the family’s actual place of stay do not always coincide. The QST withheld by the employer addresses the issue of Swiss salary deductions, but does not in itself answer what tax filing or tax credit obligations may arise in Hungary.

How are interest and royalties taxed in the Swiss–Hungarian context?

According to the Swiss–Hungarian DBA summary in the dossier, interest and royalties may be taxed exclusively in the beneficiary’s state of residence. A 0% withholding tax applies in the source state to these types of income.

Interest (Zinsen) and royalties or licence fees (Lizenzgebühren / Royalties) must therefore, under the rules set out in the dossier, be treated differently from dividends paid by a Swiss company. Dividends are generally subject to a 35% deduction under the Swiss VSt system, whereas the treaty treatment of interest and royalties depends on the tax residence of the beneficial recipient.

What does the “beneficiary’s country of residence” mean in practice?

When applying a double taxation agreement (Doppelbesteuerungsabkommen, DBA), it must be established in which country the recipient of the income is considered a resident. For a Hungarian individual, a key document may be a certificate of residence certified by the Nemzeti Adó- és Vámhivatal (NAV).

Proof of Hungarian tax residence becomes particularly important where an individual holds Swiss shares in a Swiss securities account, receives interest from a Swiss bank, or receives other investment income from Swiss sources. The type of payment and the actual tax residence together determine which treaty provision, form or refund procedure may apply.

How much Verrechnungssteuer can be reclaimed as a Hungarian resident?

Dividends paid by Swiss companies and bank interest are generally subject in Switzerland to 35% federal Verrechnungssteuer (VSt). According to the summary in the dossier, a Hungarian-resident individual may reclaim 20% of the 35% Swiss deduction from the Swiss authorities, while the remaining 15% may be credited in the Hungarian tax return.

This 20% does not apply to cantonal Quellensteuer withheld from employment income. The reclaim rate relates to the federal Verrechnungssteuer withheld on Swiss dividends or bank interest and, in the dossier, applies to Hungarian-resident individuals.

Simple example of the breakdown of the 35% deduction

The example below is intended solely to illustrate the 35%, 20% and 15% proportions set out in the dossier. It does not replace a tax return calculation and does not constitute personalised tax advice.

Before submitting an actual reclaim, it is necessary to verify whether the income concerned genuinely falls within the scope of VSt, whether the beneficiary was a Hungarian tax resident during the relevant period, and whether reliable documentation of the payment is available.

The Swiss deduction and the Hungarian tax return may involve two separate administrative steps. One is the Rückerstattung, i.e. a refund, initiated with the Swiss authority; the other concerns the credit to be handled in the Hungarian tax return.

Which forms, supporting documents and online platforms are required?

According to the reviewed dossier, foreign individuals reclaim VSt through the Swiss Federal Tax Administration (Eidgenössische Steuerverwaltung, ESTV) ESTV ePortal platform. The application requires the upload of a bank Tax Voucher and a certificate of residence certified by NAV.

A Tax Voucher is a bank tax certificate documenting the Swiss tax withheld and the related investment income. The NAV certificate of residence may support the fact that the applicant was a Hungarian tax resident during the relevant period.

What is the purpose of each document?

A Form 1 and Form 2 are not the same as a Swiss VSt reclaim initiated via the ESTV ePortal. According to the dossier, these are treaty procedures relating to Hungarian-source income: Form 1 is used for tax exemption at source (Entlastung an der Quelle), while Form 2 is used for a subsequent refund (Rückerstattung) for Swiss residents.

In what order should the VSt reclaim be prepared?

1. Identification of the type of income: must be distinguished from the QST deduction on Swiss employment income and the VSt deduction related to Swiss dividends or bank interest.

1. Proof of tax residence: for an applicant resident in Hungary, a certificate of residence certified by NAV is required.

1. Obtaining the bank certificate: the Tax Voucher must document the payment concerned and the Swiss tax deduction.

1. Submitting the online application: for foreign individuals, the dossier identifies the ESTV ePortal as the platform for submitting a Swiss refund claim.

1. Separate treatment in the Hungarian tax return: the 15% credit component referred to in the dossier relates to the Hungarian tax return and is therefore not the same as the refund claim submitted via the Swiss portal.

The language of the documents, the level of detail in the bank certificate, the procedure followed by the relevant securities account provider, and the specific completion of the Hungarian tax return may vary from case to case. An incomplete Tax Voucher or unproven tax residence may prevent a refund claim.

What limitation period applies to reclaiming Swiss withholding tax?

According to the dossier, an application submitted in 2026 may reclaim Swiss tax withheld in 2023, 2024 and 2025. This time window should be checked before submitting the relevant application against ESTV's current guidance and the ePortal interface.

The verified material available cannot be treated as a general forfeiture limitation rule applicable to every case. Therefore, it is not safe to rely solely on a general deadline tied to a calendar year, especially in the case of a multi-year investment portfolio, multiple banks, or a change in tax residence due to relocation.

What should be retained to manage deadlines safely?

For periods for which a refund claim is pending, it is advisable to retain and organise at least the following documents:

• the Tax Voucher for the relevant year, or an equivalent bank tax certificate;

• a statement confirming the amount of Swiss Verrechnungssteuer withheld;

• a certificate of residence issued by NAV for the period concerned;

• the confirmation of the application submitted through the ESTV ePortal and the case reference number;

• the relevant documents for the Hungarian tax return, if a credit for the remaining portion of the tax is being considered.

Delays of several years may entail financial risk. If the 2026 application can cover deductions only for 2023–2025, it may no longer be possible to settle the deduction for an earlier year retrospectively.

Sources

• datax-gmbh.de — Swiss withholding tax

• fr.ch — Withholding tax rates and calculation

• bill-alps.ch — Withholding tax tariff 2026

• steuerinformationen.ch — Double Taxation Agreement with Hungary

• smartbrokerplus.de — Reclaiming Swiss withholding tax

• admin.ch / ESTV — DTA list and forms

• dsw-info.de — Refund of Swiss withholding tax

• ch.ch — Withholding tax for foreign employees

• zh.ch — Withholding tax rates

• vs.ch — Withholding tax reference tables

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