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Switzerland, Canada Initial DTA

Monday, February 15, 2010

It has recently emerged that Switzerland and Canada have concluded negotiations on extending administrative assistance in tax matters in accordance with the Organization for Economic Cooperation and Development’s (OECD) standard and on other points, and have initialled a Protocol of Amendment on the existing double taxation agreement (DTA).

According to the Federal Administration, the administrative assistance clause is in line with the key points agreed by the Federal Council, and the agreement with Canada is the eighteenth with an administrative assistance clause in accordance with the OECD standard.

Although the initialled text will at first remain confidential, the Swiss cantons and business associations concerned will be notified of the content in a brief report to enable them to submit their comments.

The agreement will be published only after being signed. The Federal Council will provide authorisation for the agreement to be signed, and the DTA will subsequently be passed to parliament for approval. Once the partner state has provided its approval of the agreement, then the agreement can be ratified, a requirement for its entry into force.

Since the Federal Council decision of March 13, 2009 on extending administrative assistance in tax matters, Switzerland has initiated corresponding negotiations with numerous states. Indeed, the Federal Council has already approved the first ten dispatches on revised DTAs with an administrative assistance clause in accordance with Article 26 of the OECD Model Convention, and submitted them to parliament for approval.

Along with extending administrative assistance in tax matters, Switzerland has also been able to negotiate various benefits for the economy, including reductions in withholding tax levied on dividends, interest and royalty payments, as well as the introduction of an arbitration clause. The avoidance of tax discrimination has also been achieved. This policy will be pursued and further negotiations are already envisaged with other countries, the Federal Administration noted.