Switzerland Boosts Double Tax Agreements

by Ulrika Lomas, Tax-News.com, Brussels

25 September 2009

It has emerged that Switzerland has significantly boosted the number of double taxation agreements (DTAs) that it has in place, with the recent signing of revised OECD-compliant agreements with Finland and Mexico, and with the signing of an exchange of notes in which its revised agreement with Denmark has been extended to the Faroe Islands.

The revised agreement with Finland not only contains a provision on the exchange of tax information in accordance with the OECD standard, but also introduces a tax exemption (or zero rate) on dividends in the source country in the case of participations over 10% (previously 20%). This enables companies based in Switzerland with significant participations in Finnish companies to collect dividends without Finnish tax deductions.

The revised OECD-compliant double tax agreement with Mexico also contains further provisions of benefit to Swiss businesses. Dividends on participations over 10% will only be taxed in the state of residence. Withholding tax on interest will, under certain conditions, be lowered to 5% and 10%. Furthermore, Switzerland has negotiated most favored nation treatment with regard to interest payments and royalties, guaranteeing Switzerland equal treatment with all other OECD countries with which Mexico agrees a more advantageous arrangement in relation to the taxation of these revenues.

Finally, it has emerged that Switzerland and Denmark have recently signed an exchange of notes in which the revised DTA with Denmark has been extended to the Faroe Islands. The revised agreement contains a provision on the exchange of information in accordance with the OECD standard, and was negotiated in line with parameters decided by the Federal Council in the spring of 2009.

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