Switzerland Germany Double Taxation Treaty
Switzerland-Germany Double Taxation TreatyUpdated on Tuesday 10th September 2019
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Swiss double taxation treaties
Switzerland has signed double taxation agreements with over 100 countries and approximately half of them are modernized according to the Organization for Economic Co-operation and Development (OECD) model. The common provision of all double tax treaties Switzerland has concluded is that non-residents may apply for a partial or total tax refund with the Swiss cantonal tax authorities.
Another advantage for foreign investors from countries that have not signed any tax agreement with Switzerland is that they can ask for tax deductions in their home countries, deductions that can be obtained as tax credits in Switzerland. For other information about the advantages of doing business here, you may address to our lawyers in Switzerland.
Double taxation agreement between Switzerland and Germany
In 2011, the two countries have updated the provisions included in the Swiss-German double tax treaty. Among the most important provisions of the double tax agreement is the new threshold for the tax exemption on the distribution of dividends, that was lowered from 20% to 10%, meaning a recipient must own at least 10% of the voting power within a German or a Swiss company distributing the dividends in order to benefit from the tax exemption.
However, the recipient must own the 10% participation for an uninterrupted period of 12 months. Also, if the holding period does not satisfy the 12 months period, a 15% withholding tax on dividends will be levied with the possibility of reclaim after the required period of time has elapsed.
Considering the changes brought to the Swiss dividend declaration requirements that have changed, it is advisable to verify the new reclaim procedures with a law firm in Switzerland. The new Germany-Switzerland double taxation agreement also stipulates that dividends from German real estate companies, investment funds and investment companies will be taxed with a 15% withholding tax.
What should one know on the Swiss-German double tax treaty?
- • Switzerland and Germany have signed a treaty for the avoidance of double taxation in 1976;
- • the double tax treaty was revised at the end of 2011, adding new regulations on the taxation system;
- • the taxation on investments is imposed with a tax rate ranging from 19% to 34% (depending on the economic sector);
- • the taxation of income obtained from capital and investment is charged with a withholding tax of 26,375%;
- • a German subsidiary in Switzerland is imposed with a 0% tax on dividends;
- • royalties and interest also benefit from a 0% withholding tax.
Who can benefit from the provisions of the Swiss-German tax treaty?
- • the tax residents of the two countries that have agreed upon a double tax treaty;
- • natural persons who have a permanent residency both in Germany and Switzerland;
- • companies developing import activities in Switzerland or Germany;
- • companies or groups of companies operating through subsidiaries in a foreign country;
- • persons who are citizens of a country and who are employed on a short-term basis in the other country.
What does the OECD model promote?
What are the regulations concerning a permanent establishment in Switzerland?
Exchange of information between Switzerland and Germany
The treaty for the avoidance of double taxation signed by Switzerland and Germany prescribes provisions on the exchange of tax information, as stipulated by the requirements of the Organization of Economic Cooperation and Development (OECD).The double taxation agreement states that the exchange of information must take place for all the taxes covered by the treaty. However, the information may be communicated only at the request of the tax authorities in Switzerland or Germany.
For complete information about the double tax agreement with Germany, please refer to our attorneys in Switzerland. Our team of Swiss lawyers can present more details on other regulations addressed to specific business sectors (the treaty includes provisions regarding the taxation of income obtained from shipping or aviation, for example).