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Double Tax Treaties in Switzerland

With one of the most developed economies around the world, Switzerland is attracting thousands of foreign investors every year so the necessity of concluding specific treaties was a priority for the Swiss government.

More than 80 double tax treaties were signed all over the years with: Egypt, Albania, Algeria, Argentina, Armenia, Azerbaijan, Australia, Bangladesh, Belarus, Belgium, Bulgaria, Chile, China, Denmark, Germany, Ecuador, Ivory Coast, Estonia, Finland, France, Ghana, Greece, Great Britain, Honk Kong, India, Indonesia, Iran, Ireland, Ireland, Island, Israel, Italy, Jamaica, Japan, Canada, Kazakhstan, Qatar, Kirgizstan, Columbia, Korea, Croatia, Kuwait, Latvia, Lithuania, Liechtenstein, Luxembourg, Malaysia, Malta, Morocco, Macedonia, Mexico, Moldova, Mongolia, Montenegro, New Zealand, Netherlands, Norway, Austria, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Sweden, Serbia, Singapore, Slovakia, Slovenia, Spain, Sri Lanka, South Africa, Tajikistan, Thailand, Trinidad and Tobago, Czech Republic, Tunisia, Turkey, Ukraine, Hungary, Uzbekistan, United States of America, Venezuela and Vietnam.

Many of these treaties signed by Switerland are elaborated after the OECD model. This model was introduced in Switzerland in 2009 by the decision of the Federal Council which also decided to amend the existing treaties according to the Article 26 of the OECD Model Convention.

The main regulation of the double tax treaties is that the withholding tax on income and capital can be reduced or exempt for the companies with shareholders with the residency in one of the above countries. The income can be partially withhold in Switzerland and refunded after the special application to the proper Swiss tax administration. Also, the income may not be taxed at all, if the nonresident is proving that it is already taxed in the treaty country.

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Also, exchange of information between the Swiss authorities and the foreign tax authorities is guaranteed by the double tax treaties. Based on the exchanged annual lists of shareholders, Sweden and the treaty countries are avoiding the tax frauds.

As a particularity, the banking secrecy remains, even though the double tax treaty is signed between Switzerland and one of the above countries.

The withholding taxes on dividends, interests and royalties are smaller for a company with foreign capital or if certain conditions are met, can be exempt (for example a 25% owning of the company’s capital).

 

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