Switzerland and Russia are bringing the Agreement for the Avoidance of Double Taxation of 15.11.1995 into conformity with the standards of the Organization for Economic Cooperation and Development (OECD). The Protocol amending this Agreement was signed on September 24, 2011 and was supposed to come into force on January 1, 2013 after its ratification by the Russian Parliament, the President and Parliament of Switzerland.
The OECD directives envisage information exchange as an administrative assistance on the issues of tax evasion and on tax fraud. Such information can be disclosed only in cases of a well-grounded inquiry within the investigation of a specific tax case. In order to receive this administrative assistance one should, in addition to the usual information, provide the name of a person who is presumably evading tax, as well as the name of the financial institution that is presumed to have the money on its accounts. In doing so, the parties are preventing automatic data exchange.
In addition to the complex regulations of tax information exchange between the Russian and Swiss tax authorities, the Protocol includes a number of other changes that provide Switzerland with certain competitive advantages for Russian citizens and strengthen the role of Russia as an important business partner of Switzerland.
The following amendments were made in the Protocol:
- Dividends may be taxed in the Contracting State of which the company paying the dividends is resident and according to the laws of that State. However, if the recipient is the beneficial owner of the dividends, the tax charged must not exceed: а) 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership), which holds directly at least 20% of the capital of the company paying the dividends and the share at the moment of dividend payment exceeds 200,000 Swiss Francs (or its equivalent in any other currency); b) 15% - in all other cases.
- The 10% withholding tax on the interest paid to a resident of one Contracting State by a resident of another Contracting State is cancelled. The recipient State shall have an exclusive right to the taxation of interest.
- The term “dividends” is interpreted more broadly. It now includes any payments on units in investment funds and real estate funds, deriving more than 50% of their income from shares. If this income is less than 50% then these interest payments are considered exempt from taxation at source.
- Pension funds shall be exempt from taxation at source in the State of which they are resident.
- “Anti conduit” arrangements are introduced to limit the tax privileges at the payment of dividends, royalty and interest in accordance with the Agreement for the Avoidance of Double Taxation.
- Taxation of capital derived from the alienation of shares will be changed in the following way: Gains derived by a resident of a Contracting State from the alienation of shares in a , company deriving more than 50% of its asset value from immovable property situated in the other Contracting State shall be taxed in this other state. The following cases are excluded from this regulation:
а) shares quoted on a stock exchange;
b) shares of the companies that use their immovable property as the place for conducting their business.
- The tax residence of a company is the State where the majority of its administrative decisions are made.
The complete text of this Protocol is published on the official website of the Swiss Federal Tax Administration in German, English and Russian languages.