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New Swiss-Dutch DTA Signed

Friday, March 5, 2010

It has recently emerged that Switzerland and the Netherlands have signed a new double taxation agreement (DTA).

According to the Swiss Federal Administration, the new agreement replaces the existing DTA of 1951/1966, and contains provisions on the exchange of information in accordance with the Organization for Economic Cooperation and Development (OECD) standard.

The Swiss Federal Administration also notes that, compared with the current DTA, improvements have been achieved in the area of withholding taxes; the percentage holding for withholding tax exemption for dividends has been reduced from 25% at present to 10%. Dividend payments to pension funds will also be exempt from tax in the source state in future. Furthermore, a zero rate has been agreed for interest. The new DTA also contains an arbitration clause, used if the competent authorities are unable to reach an agreement within three years following the commencement of a mutual agreement procedure.

Following the negotiations between the two countries, Switzerland submitted a report on the new DTA to the cantons and the business associations concerned for their comments.

Now that the DTA has been signed, the Swiss Federal Council will approve a dispatch for the attention of parliament, responsible for approving the DTA (as a precondition for ratification and entry into force). Under the current practice, DTAs that provide for significant additional obligations are subject to an optional referendum. As was the case up to now, the decision as to whether or not a double taxation agreement should be subject to an optional referendum rests with parliament.

The agreement can enter into force once the Netherlands has provided its approval.