Switzerland, Uruguay Sign Tax Agreement

by Ulrika Lomas, Tax-News.com, Brussels

19 October 2010

Swiss Federal Councillor, Hans-Rudolf Merz ,and the Uruguayan Economy and Finance Minister Fernando Lorenzo have signed a double taxation agreement (DTA) in respect of taxes on income and capital.

The DTA also contains provisions on the exchange of information which were negotiated in line with the parameters decided by the Federal Council and are in accordance with the Organization for Economic Cooperation and Development (OECD) standard. The DTA will improve bilateral economic relations and boost direct investments.

In addition to the exchange of information in accordance with the OECD standard, Switzerland and Uruguay have agreed that dividends will be taxed at 15% in the source state; for companies with a stake of more than 25% in the paying company, dividends will be taxed at 5% in the source state.

The state of residence also has the right of taxation concerning interest payments, but the source state can tax interest payments at 10%. Interest in connection with sales on credit will be exempt from tax. On long-term bank loans there will be no withholding taxes. Royalties will be taxed only in the state of residence of the payment recipient, so long as Switzerland does not levy withholding tax on royalties.

After negotiations finished, a report on the agreement with Uruguay was submitted to the cantons and business associations concerned for their comments. The Conference of Cantonal Finance Directors and the business associations largely approved the signing of the agreement.

After approval in the Swiss parliament, lawmakers need to decide whether or not the double taxation agreement should be subject to an optional referendum.

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