Double taxation agreements

Double taxation agreements (DTAs) prevent the double taxation of natural persons and legal entities with an international nexus in the area of taxes on income and capital. They therefore represent an important element in promoting international economic activities. Switzerland currently has DTAs with over 100 countries and is seeking to extend its agreement network further. Switzerland also has eight agreements for the avoidance of double taxation with respect to inheritance and estate taxes.   

Double taxation typically occurs when two states tax the same income or assets of a taxpayer. Most of the provisions of a DTA are dedicated to avoiding double taxation by giving the contracting states the right to tax the individual types of income and assets. However, they merely restrict the contracting states' taxation right. The basis for taxation lies in the contracting states' domestic law. 

The list of persons who can benefit from a DTA is long and varied, e.g.: 

  • Persons who simultaneously have a permanent residence in two states
  • Export companies and groups with foreign subsidiaries that are protected from double taxation by a DTA
  • Employed persons with temporary work assignments abroad

DTAs additionally have an important function for investments of all kinds abroad, as they avoid double taxation on profits and revenue from foreign investments. Moreover, a DTA generally contains certain bans on discrimination, a dispute resolution mechanism and a clause on the exchange of information upon request.

Since the beginning of 2018, the DTAs with Kosovo and Pakistan and the protocols amending the DTAs with Ghana and Latvia have entered into force. In addition, new DTAs have been signed with Saudi Arabia and Brazil, as has the revision of the existing DTA with Ukraine.

    

The outcomes of the BEPS project also contain recommendations that require adjustments to existing DTAs, for example. With the aim of swift implementation, a group of over 100 states and territories drew up a convention to implement the agreement-related BEPS measures. 

Switzerland signed the BEPS convention in 2017. The Federal Council submitted the dispatch to parliament on 22 August 2018. This envisages that the BEPS convention will apply to Switzerland's DTAs with Argentina, Chile, Iceland, Italy, Lithuania, Luxembourg, Mexico, Austria, Portugal, South Africa, the Czech Republic and Turkey. Parliament approved the proposal in the 2019 spring session. The period for calling a referendum is currently under way. 

For DTAs which are not affected by the BEPS convention, SIF intends to propose bilateral DTA amendments to the partner states so that the agreement-related results of the BEPS project, in particular the agreement-related provisions which are minimum standards, can be implemented. 

 

Further information

Last modification 16.07.2019

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