Double taxation agreements (DTAs) prevent the double taxation of private individuals and legal entities with an international nexus in the area of taxes on income and capital. They are therefore an important element in promoting international economic activities. Switzerland currently has DTAs with over 100 countries and is seeking to extend its agreement network further. Switzerland also has eight agreements for the avoidance of double taxation with respect to inheritance and estate taxes.
Country information
(in German, link to the Federal Tax Administration FTA)
Double taxation typically occurs when two states tax the same income or assets of a taxpayer. Most of the provisions of a DTA are dedicated to avoiding double taxation by giving the contracting states the right to tax the individual types of income and assets. However, they merely restrict the contracting states' taxation right. The basis for taxation lies in the contracting states' domestic law.
The list of persons who can benefit from a DTA is long and varied and includes:
DTAs additionally have an important function for investments of all kinds abroad, as they avoid double taxation on profits and revenue from foreign investments. Moreover, a DTA generally contains certain bans on discrimination, a dispute resolution mechanism and a clause on the exchange of information upon request.
Since the beginning of 2021, the DTAs with Brazil, Saudi Arabia and Bahrain and the protocols amending the DTAs with Malta, Cyprus, Liechtenstein and Japan have entered into force. Furthermore, the DTA with Ethiopia and the protocols amending the DTAs with North Macedonia, Armenia, Tajikistan and the United Arab Emirates were signed.
The outcomes of the base erosion and profit shifting (BEPS) project contain recommendations which require existing DTAs to be amended. Existing DTAs can be adapted to the treaty-related solutions developed in the BEPS project by means of the Multilateral Convention to Implement Tax Treaty Related Measures (BEPS Convention).
The BEPS Convention came into force on 1 December 2019. With it, Switzerland intends to adapt the DTAs with Argentina, Austria, Chile, the Czech Republic, Iceland, Italy, Lithuania, Luxembourg, Mexico, Portugal, South Africa and Turkey to the treaty-related BEPS minimum standards.
In order for the amendments introduced by the BEPS Convention to take effect, Switzerland must make an additional notification to the depositary of the BEPS Convention indicating that the necessary procedures have been completed. The first such case concerned Luxembourg. In a Memorandum of Understanding of 12 May 2020, the competent authorities of Switzerland and Luxembourg adopted the exact wording of the amendments provided in the BEPS Convention (see RO 2020 2641 and RO 2020 2715, in German). The procedure has thus been completed and Switzerland has made the aforementioned notification to the depositary of the BEPS Convention. The amendments are reflected in the double taxation agreement between Switzerland and Luxembourg. Further agreements have since been concluded with Lithuania (see RO 2021 28) and the Czech Republic (see RO 2021 29).
Switzerland intends to adapt DTAs which will not be amended by the BEPS Convention to the BEPS minimum standards by means of bilateral amendments to the DTAs.