Switzerland to draft rules giving tax credits to nonresident PEs that receive income subject to non-recoverable withholding

Switzerland’s Federal Council, on April 22, announced that it has instructed the Federal Department of Finance to create the legal basis for rules that would provide a flat-rate tax credit for foreign companies’ permanent establishments in Switzerland which have their registered office in a country with which Switzerland has a double taxation agreement (DTA).

The credit would alleviate double taxation in cases where the permanent establishment receives dividend, interest, or royalty payments upon which a non-recoverable withholding tax is levied from a third country with which Switzerland has signed a double tax agreement.

The measure will be included in the Federal Act on Tax-Related Measures to Strengthen the Competitiveness of Switzerland as a Business Location, which would be the third series of corporate tax reforms.

The government said the proposal received mostly favorable feedback during a consultation launched September 19, 2014.

See:

• Release

Related MNE Tax articles:

• Switzerland consults on extension of tax credit to permanent establishments

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