Partial Taxation of Dividends by Canton

A participation qualifies when the shareholder holds at least 10% of the share or nominal capital of the company (Art. 20 para. 1bis DBG, Art. 7 para. 1 StHG). This threshold applies at the federal level and in most cantons. Typical cases: sole shareholders or partners of their own AG or GmbH, family holding structures, SME co-owners with a blocking minority. Anyone holding shares in a listed company as a small shareholder will almost never reach the 10% threshold and pays full income tax on the dividend.

At the federal level, 70% of the dividend is taxed as income; 30% is tax-free (Art. 20 para. 1bis DBG, since TRAF 2020). The cantons set their own rates: - 50--60%: ZH, ZG, SZ, NW, OW, AI, SH -- here only half or slightly more is taxed. - 60--70%: BE, LU, AG, SG, TG, GR, FR and others. - 70--80%: BS, GE, VD, NE -- these cantons tax dividends more heavily. The cantonal rate determines how attractive a dividend distribution is compared to a salary payment.

Without partial taxation, the profit of an AG or GmbH would be taxed twice: first as corporate profit (profit tax approx. 12--22%) and then again for the shareholder as income (marginal tax rate up to 45%). The total burden would exceed 50%. Partial taxation mitigates this economic double taxation by taxing only a portion of the dividend at the shareholder level. In Zurich (50% cantonal, 70% federal), the total burden from profit tax and dividend tax is typically 30--40%.