The Swiss Federal Department of Finance has announced the entry into force of tax treaties with Liechtenstein and Oman.
The tax treaty between Switzerland and Liechtenstein will enter into force on 22 December. The agreement with Lichtenstein was signed on 10 July 2015 and the provisions of the agreement will be applicable from 1 January 2017. It replaces the current agreement of 22 June 1995 between Switzerland and Liechtenstein on various tax issues. This was the first time a comprehensive DTA was concluded between Switzerland and Liechtenstein.
The DTA between Switzerland and Oman came into force on 13 October. This was the first time a DTA was concluded between Switzerland and Oman. The countries signed the agreement on 22 May 2015. Its provisions will be applicable from 1 January 2017.
The two DTAs follow the OECD Model Tax Convention, covering all the typical aspects to avoid double taxation.
In particular, the Swiss-Lichtenstein DTA, in paragraph 3 of article 5 on permanent establishment, provides that a building site, construction, or installation project constitutes a permanent establishment only if it lasts more than twelve months, while the DTA with Oman states that nine months are necessary to have a permanent establishment.
The DTA with Lichtenstein contains a provision on taxation of business profits, article 7, that is in line with the one provided by the 2010 OECD Model Tax Convention, while article 7 of the Swiss-Oman DTA is in line with the 2008 OECD Model Tax Convention.
On dividends, paragraph 2 of article 9, the agreement with Lichtenstein states that the tax charged in the source state shall not exceed 15 percent of the gross amount, while the one with Oman mirrors the provision of the OECD Model Tax Convention, therefore the tax charged in the source state shall not exceed: a) 5 percent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 percent (instead of 25 percent of the OECD Model Tax Convention) of the capital of the company paying the dividends; b) 15 percent of the gross amount of the dividends in all other cases.
On interest, article 10, the Swiss-Lichtenstein DTA provides that interest is taxed only in the recipient state, while the agreement with Oman states that the source state can levy a tax on interest that shall not exceed 10 percent of the gross amount.
Both the DTAs state that royalties shall be taxed in the state of the recipient.
Furthermore, the Swiss-Oman DTA does not contain article 22 on taxation of capital.
Finally, the two DTAs contain a provision on the exchange of information upon request according to the internationally applicable standards.
The finalization of these two agreements would contribute to the development of good economic relations between Switzerland and Liechtenstein and between Switzerland and Oman.
To date, Switzerland has signed 54 DTAs and ten tax information exchange agreements (TIEAs) that are in line with the international standard on the exchange of information upon request, and of these, 49 DTAs, including the DTA with Liechtenstein, and seven TIEAs are in force.
Davide Anghileri
Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.
Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.
Davide can be reached at [email protected].
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