Switzerland, Japan Revise DTA

by Lorys Charalambous, Tax-News.com, Cyprus

21 May 2010

Switzerland and Japan have concluded a revision to their double taxation agreement (DTA), which will reduce withholding taxes in many situations.

The protocol to the agreement was signed in a ceremony in Bern on May 21 between Swiss Finance Minister Hans-Rudolf Merz and Ichiro Komatsu, Japan's Ambassador to Switzerland.

Compared with the current DTA, improvements have been achieved in the area of withholding taxes: and exemption has been agreed for dividends and royalty payments to companies that hold at least 50% of the voting rights; dividend payments to pension funds will be exempt from tax in future; and the withholding tax on dividends paid to companies that hold at least 10% (previously 25%) of the voting rights of the distributing company will be reduced from 10% to 5%. All other dividend payments will be subject to withholding tax of 10% (previously 15%).

Certain interest payments will also be exempt from withholding tax, e.g. if they are made to financial institutions (banks, insurance or reinsurance companies, securities dealers) or pension funds.

The double tax agreement has also been revised to include provisions for the exchange of tax information upon request, allowing the respective countries’ tax authorities to cooperate in civil and criminal tax matters.

The agreement must be ratified by both countries' legislatures before it can enter into force.

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