Switzerland-UAE Double Taxation Treaty

Switzerland-UAE double taxation avoidance treaty

Switzerland added the United Arab Emirates to its double taxation agreements list at the end of 2011. The agreement refers to the avoidance of double taxation with respect to income taxes. The agreement was enforced at the beginning of 2012 in both Switzerland and the UAE. Another clause of the double taxation agreement refers to administrative assistance. The convention was applied to UAE and Swiss withholding taxes from 2012 and to all other taxes from 2013.

Avoidance of double taxation according to the Switzerland-UAE agreement

Some of the most important provisions of the Switzerland-UAE double taxation treaty refer to the taxation of dividends, interests, royalties and capital gains. The agreement provisions that dividends paid by a Swiss company to an UAE resident may be taxed in the United Arab Emirates. The tax paid by the company will not exceed 5% if the recipient is a company holding at least 10% of the share capital in the company paying the dividends. In all other cases the payment of dividends is taxed with 15%. With respect to interests and royalties arising in one of the two states and paid to a resident of the other state, the tax may be levied in the other state. Capital gains resulting from the alienation of shares in an UAE or Swiss company will be taxed in the alienator’s resident country. However, if the assets consist of immovable property, the capital gains tax will be levied in the country the property is located.

What are the advantages of the Switzerland-UAE double taxation agreement?

The main advantage of the Switzerland-UAE double tax treaty is the reduction of the dividend tax paid by a Swiss company to a foreign company with 30% provided that the 10% participation clause applies. Also, considering the UAE does not levy any corporate tax and provides very advantageous types of investment vehicles, investor may register holding companies in the Emirates with participation in Swiss companies. Also, the dividend incomes resulted from the investments made in the Swiss company will be exempt from taxation.

For complete information about the advantages offered by the double taxation treaty with the UAE, please contact our Swiss attorneys.