On 17 July 2019, the US Senate approved the 2009 protocol amending the double taxation agreement (DTA) in the area of income tax between Switzerland and the USA. It is a milestone in the tax relations between Switzerland and the USA by introducing the exchange of information upon request in tax matters between the two countries according to the international standard.
The current bilateral DTA between Switzerland and the USA dates back to 1996. On 23 September 2009, the two countries signed a protocol amending their DTA, which was approved by the Federal Assembly on 18 June 2010. In the USA, the Senate is responsible for approval. In recent years, however, no DTAs or amending protocols have been approved by the US Senate.
Formally, the protocol of amendment enters into force on the date of the exchange of the instruments of ratification. The core element of the protocol of amendment is the exchange of information: it provides that requests for information may be made from the entry into force of the protocol. Requests relating to financial accounts must concern cases from 23 September 2009 onwards (date of signature of the 2009 protocol of amendment).
There is now no difference between tax evasion and tax fraud. This is in line with the international standard on the exchange of information upon request, which Switzerland applies to more than 100 states and territories but did not previously apply to the USA.
Under the new provision, group requests are also allowed for cases of tax evasion. Under the FATCA Agreement, group requests are admissible for cases from 30 June 2014 onwards.
Further provisions are: dividends paid to individual retirement arrangements – pillar 3a in Switzerland – will be exempt from withholding tax from 1 January 2020 (provided the protocol of amendment enters into force in 2019). A mandatory arbitration clause ensures that double taxation is avoided even in cases where the competent authorities cannot reach an agreement in the mutual agreement procedure.
The Swiss Parliament no longer has to approve the protocol of amendment. The approval by the US Senate now paves the way for a further revision of the DTA. The aim of such a revision is to make further improvements which take account of developments since the DTA was signed in 1996.