Switzerland Signs New Double Tax Treaty with Liechtenstein

Written by: Bridgewest

Switzerland-Signs-Double-Tax-Treaty-with-LiechtensteinAt the beginning of 2015 Switzerland has concluded negotiations for a new double tax agreement with Liechtenstein. The agreement was signed at the beginning of July and contains information about the taxation of income and capital. This is the first double taxation agreement between the two countries, the first tax treaty referring to employees crossing from Switzerland to Liechtenstein, only.

What does the Switzerland-Liechtenstein double tax treaty contain?

The most important provisions of the Swiss double tax agreement with Liechtenstein are the lower taxes applied to dividends and interest payments. According to the new double tax treaty, the withholding tax applied to interests paid to Swiss and Liechtenstein recipients will be reduced to 0%. With respect to the taxation of dividends, the new dividend tax rates will be reduced from 35% to 15%. However, there are few exceptions to the taxation of dividends in both Switzerland and Liechtenstein.

For additional information about the taxation of dividends under the new double taxation treaty you may refer to our lawyers in Switzerland.

The clauses of the first tax treaty signed by the two countries in 1995 referred to the taxation of cross-border commuters and the new agreement maintains those provisions for Liechtenstein and Swiss workers to be taxed in their country of residence. However, the new agreement provides for the taxation of state and occupational pensions to be made exclusively in the country of residence of the beneficial owner, also. 

The new protocol added to the Switzerland-Liechtenstein double tax treaty

The new tax agreement between Switzerland and Liechtenstein is based on the Organization for Economic Co-operation and Development (OECD) model which is why a protocol providing for the exchange of tax information was also added. Switzerland has started to amend its double tax treaties with protocol for the exchange of information in order to comply with international standards on taxation. With respect to the treaty with Liechtenstein, it is expected for the agreement to enhance trade relations between the two countries. It is also expected for investors with cross-border to relations in Switzerland and Liechtenstein to intensify their activities.

The new agreement will be enforced starting with January 2017.