Australia, Switzerland Strengthen TIE Provisions

By Editorial 31 July, 2013

Changes to the Australia-Switzerland tax treaty will permit authorities to exchange taxpayer information and align their bilateral tax arrangements more closely with current Australian and international treaty policy settings.

The revised agreement will replace the existing deal signed in 1980. The information exchange provisions have been amended in an effort to detect and prevent tax avoidance and evasion. They will apply to information held by banks and other financial institutions.

According to Australia's Assistant Treasurer David Bradbury: "This reflects both Governments' commitment to a fair tax system and is consistent with ongoing international efforts, including within the G20, to improve tax system integrity globally."

New anti-abuse rules will deny treaty benefits, in certain circumstances, if an individual's "principal purpose" is deemed to be to take advantage of the treaty. In addition, non-discrimination rules will prevent Australia and Switzerland from treating each other's nationals any less favorably for tax purposes than they would their own nationals in similar circumstances.

Three withholding tax rates will be applicable to dividends in their source country. Dividends paid to complying Australian superannuation funds and to tax-exempt Swiss pension schemes, along with those paid to public listed companies (or their subsidiaries) and to unlisted companies meeting a range of criteria, will face a 0 percent rate. Dividends paid to companies holding 10 percent or more of the paying company will be taxed at 5 percent, and all other dividends will attract a 15 percent rate.

Interest paid to government bodies, central banks, and banks unrelated to the payer, will not be taxed, although a 10 percent withholding tax will be levied in all other cases. Royalties will be taxed at up to 5 percent. A revised definition of "royalties" excludes the right to use industrial, commercial or scientific equipment from the definition.

The agreement will enter into force after both Australia and Switzerland have completed their relevant domestic procedures.

Tags: Tax | Tax Information Exchange Agreement (TIEA) | Double Tax Agreement (DTA) | Tax Avoidance | Interest | Royalties | Australia | Agreements | Tax Rates | Withholding Tax | Switzerland | Dividends | G20 | Expats |


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