Wednesday, September 9, 2020
On August 26, 2020, the Swiss Federal Council ratified a new double taxation agreement (DTA) with Bahrain and a Protocol to revise its DTA with Kuwait.
The Federal Council said that the DTA with Bahrain will lower tax withheld at source for cross-border income. Dividends will be taxed at five percent at source where the recipient beneficially owns at least 10 percent of the capital of the company paying the dividends, and 15 percent in all other cases. The double tax agreement provides for an exemption from withholding tax at source for interest income and royalties.
The DTA also contains provisions for the exchange of information on request and introduces BEPS minimum standard provisions, including the new preamble to prevent treaty shopping and to block the treaty from being used to avoid tax inappropriately.
The protocol to the DTA with Kuwait is intended to also introduce provisions to counter tax base erosion and profit shifting and includes an arbitration clause through which both countries agree to resolve long-standing double tax disputes through the appointment of an independent arbitrator.
The DTA with Bahrain and the protocol with Kuwait must be approved by the legislative bodies of the countries concerned before they can enter into force.