Switzerland And France Revise Tax Treaty

by Ulrika Lomas, Tax-News.com, Brussels

01 September 2009

Swiss President Hans Rudolf Merz met with French Minister for the Economy, Industry and Employment Christine Lagarde on August 27 to amend the double taxation agreement the two countries share to provide for greater transparency and the exchange of information in tax matters in line with the OECD’s internationally-agreed standard.

Since the Swiss Federal Council's decision on March 13, 2009, France is the third country with which Switzerland has signed a DTA which includes the extended administrative assistance clause in accordance with Article 26 of the OECD Model Convention, after Denmark and Luxembourg. In order to be removed from the "grey list", issued by the OECD Secretariat on behalf of G20 countries as a result of its April 2 meeting, twelve agreements which include the OECD standard have to be signed.

Up to now, Switzerland has negotiated DTAs with thirteen countries that include an extended administrative assistance clause in accordance with Article 26 of the OECD Model Convention. Along with the agreements already signed with Denmark, Luxembourg and France, there are agreements with Norway, Mexico, the USA, Japan, the Netherlands, Poland, the UK, Austria, Finland and Qatar. The latter have been initialled but are not yet signed. The Federal Council has given the go-ahead for DTAs to be signed with Denmark, Luxembourg, Norway, France, Mexico and the United Kingdom. The other initialled DTAs will be submitted to the Federal Council shortly for approval to be signed.

This additional agreement replaces the protocol signed on January 12, 2009, which was renegotiated in line with the parameters decided by the Federal Council on March 13, 2009. Along with extending administrative assistance, the negotiations with France were also used to carry out other amendments. Along with other issues, the additional agreement specifically regulates the tax treatment of second pillar lump-sum benefits to recipients resident in France and pension institutions covered by the agreement, thereby making them eligible for the reduction of withholding tax on dividends and interest. With the introduction of a clause on abuse, the additional agreement contains more favourable solutions than was previously the case for economic interests in Switzerland. In addition, an arbitration clause has been included in the revised DTA.

A report on the additional agreement was submitted to the cantons and the business associations concerned for their comments after negotiations were concluded.

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