Double Tax Treaties in Switzerland

Switzerland is one of the many countries concluding double taxation treaties in order to avoid taxes on incomes and capital that could be applied twice to individuals or companies.  Most Swiss double taxation agreements (DTAs) comply with the OECD Model Tax Convention on Income and Capital enabled in 2009 by the Federal Council.

Purposes of double taxation agreements in Switzerland

Switzerland has concluded double tax treaties with about 100 countries. The core purpose of double taxation treaties is the partial or total refund of taxes paid by individuals or foreign companies in Switzerland. If no treaties have been concluded foreign entities withholding taxes are applied in foreign countries and the companies will benefit from tax credit with the Swiss authorities. Royalties and profits made by a Swiss branch that are sent back to the parent company in another country are not subject to any withholding taxes and are not conditioned by any double taxation treaty. Double taxation agreements in Switzerland are also meant to encourage foreign investment.

Countries that have double tax treaties with Switzerland

As mentioned above, Switzerland has double taxation treaties with about 100 countries. Some of these countries are:

• –        In Europe: Austria, Belgium, The United Kingdom, Germany, France, Greece, Hungary, Ireland, Italy, Romania, Finland, Denmark and Spain;
• –        In Asia: China, Japan, Taiwan, Thailand, India and Indonesia;
• –        In South America: Venezuela, Argentina, Chile and Mexico.

Switzerland also signed double tax treaties with Russia (whose key provisions Russia unilaterally suspended in August 2023), Turkey, the United States, Australia and several African countries.

Our law firm can offer you details about the taxes imposed in Switzerland.

Treaty abuse in Switzerland

If double taxation treaties have been breached, Switzerland has the right to consider it an abuse and act accordingly. Under Swiss laws in order to abuse a tax treaty one of the following conditions must be breached:

• –        The company must have a balanced debt/equity ratio;
• –        A company must not have great interest rates on contracted loans;
• –        The company must pay less than 50% of its turnover to non-residents;
• –        At least 25% of the company’s income must be paid in dividends;

If either one of these conditions is not met the withholding taxes will not be refunded.

Swiss companies paying dividends, interest or royalties to associated EU companies (holding of at least 25% for at least two years), e.g. German, Italian, French and Belgian companies are also exempt from withholding taxes on dividends, royalties or interests, disregarding double taxation agreements.

If you want to set up a company and need legal advice you can contact our lawyers in Switzerland.