Favourable conditions for international business activities
DTAs set out the right of taxation for individuals and legal entities. In this regard, the withholding taxes on dividends, interest and royalty payments should be eliminated or reduced insofar as possible. These provisions facilitate the activities of the export sector; they promote investment in Switzerland and thereby contribute to prosperity in Switzerland and in the relevant partner country.
In view of the global integration of the economy, Switzerland has for many years been expanding the network of DTAs with the country's most important trading partners. This should prevent the Swiss economy from being placed at a disadvantage relative to foreign competitors. At the same time, the Federal Council is striving to continually adapt the existing agreements to new developments in the European Union and OECD regions, and thereby to improve them.
Principles of Switzerland's DTA policy
With its DTA policy, Switzerland is pursuing the objective of effectively avoiding double taxation, achieving legal security, promoting the bilateral exchange of goods and services, and facilitating direct investments between partner states.Switzerland's agreement policy is geared towards the following principles:
- Competitiveness in relation to other business locations: DTAs with conditions which are as favourable as those of other important alternative locations are to be concluded. This is a precondition for Switzerland to make investments in partner states.
- Taxation according to economic capability: taxation should be geared to the success achieved by a company. Here, the expenses incurred should be taken into account in addition to revenue.
- Efficiency: the tax revenues resulting from the allocation of the right to levy tax should be in a reasonable proportion to the collection work for the tax administrations and companies.
- Mutuality (effective reciprocity): both contracting countries should be able to exercise the right to tax that income which has been allocated to them as the source state in the agreement.
Expansion of administrative assistance in DTAs
In March 2009, the Federal Council decided to extend administrative assistance in tax matters and to include the provisions of Article 26 of the OECD Model Convention in new and existing double taxation agreements. Since then, Switzerland has negotiated agreements which contain the new administrative assistance provisions with various countries.
On 18 July 2012, the OECD further interpreted the provisions on administrative assistance in accordance with Article 26 of its Model Convention. International administrative assistance now has to be granted also for groups of taxpayers and not only in individual cases. In the case of group requests, the persons concerned must be identified by means of specific search criteria. So-called fishing expeditions, i.e. requests without concrete indications, remain expressly prohibited.
As a member of the OECD, Switzerland had to write the changes into national law. Switzerland's Tax Administrative Assistance Act (TAAA) entered into force on 1 February 2013.
A partial revision of the TAAA became necessary in order to be in line with international standards. Since 1 August 2014, in exceptional cases, persons who are the subject of an administrative assistance request can be notified only after data has been disclosed. An exception would be justified if prior notification would jeopardise an investigation, for example.