Switzerland and Mexico sign revised double taxation agreement

Bern, 21.09.2009 - On Friday, Switzerland and Mexico signed a Protocol to amend the double taxation agreement (DTA) in the area of taxes on income in Mexico City. The Protocol of Amendment also contains a provision on the exchange of information in accordance with the OECD standard which was negotiated in line with parameters decided by the Federal Council.

Following the Federal Council decision on 13 March 2009, Mexico is the seventh country with which Switzerland has signed a DTA containing the extended administrative assistance clause in accordance with Art. 26 of the OECD Model Convention, after Denmark, Luxembourg, France, Norway, Austria and the UK. Switzerland has to date negotiated DTAs with an extended administrative assistance clause in accordance with Art. 26 of the OECD Model Convention with fifteen states and territories. Along with the agreements already signed, there are agreements with the USA, Japan, the Netherlands, Poland, Finland, Qatar and Singapore. These DTAs have been initialled but not yet signed. The Federal Council has also given the go-ahead for the DTA with the USA, Finland and Qatar to be signed. The Federal Council has also approved an extension of the Protocol of Amendment with Denmark and the Faroe Islands under which Switzerland has also agreed to an exchange of information according to OECD standards even with the Faroe Islands.

In addition to the extension of administrative assistance, the Protocol of Amendment also contains further provisions of benefit to Swiss businesses. Dividends on participations over 10% will only be taxed in the state of residence. And under certain conditions, withholding tax on interest will be lowered to 5% and 10%. Furthermore it has been possible to agree most favoured nation treatment with regard to interest payments and royalties. This clause guarantees Switzerland equal treatment with all other OECD countries with which Mexico agrees a more advantageous arrangement in relation to the taxation of these revenues.

Following the conclusion of the agreement a report on the Protocol of Amendment was submitted to the cantons and the business associations concerned for their comments. The signing of the revised agreement was broadly welcomed.

Stages before entry into force

Initialling is defined as the approval of a contractual text by appending initials. Negotiators can in this way provisionally draw up the negotiated contractual text of DTAs (and other agreements based on international law). The initialled text is at first confidential. The cantons and the business associations concerned are notified of the content in a brief report and invited to submit their comments. In the case of negotiations specialist representatives from the cantons may in addition take part.

The agreement is published only after it has been signed. The Federal Council authorises the signing of the agreement. The FDF will then prepare a dispatch for the attention of parliament, which is responsible for approving (ratifying) the DTA. If the partner State has also approved the agreement, it may come into force. The date of entry into force depends on the agreement concerned. The provisions in the DTA apply in accordance with the rules adopted in the agreement, normally from the 1 January of the calendar year following the date of entry into force.

Under the current practice, DTAs that provide for significant additional obligations are subject to an optional referendum. In the view of the Federal Council, the first double taxation agreement with the new administrative assistance provisions approved by parliament should therefore be subject to an optional referendum. However, the final decision as to whether or not a double taxation agreement should be subject to an optional referendum rests with parliament as was the case up to now.


Address for enquiries

François Bastian, International Division, Federal Tax Administration, tel. 031 32 27152



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Federal Department of Finance
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