INTERNATIONAL TAX PLAZA - Swiss Federal Department of Finance: “Federal Council decides on next steps in avoidance of double taxation of permanent establishments”

(April 22, 2015)

On April 22, 2015 a press release titled “Federal Council decides on next steps in avoidance of double taxation of permanent establishments” was published on the website of the Swiss Federal Department of Finance. The press release states that during its meeting of April 22, 2015, the Federal Council took note of the result of the consultation on the revision of the ordinance regarding the flat-rate tax credit in the case of permanent establishments (implementation of Pelli motion 13.3184).

According to the press release the legal basis for the ordinance is to be created first of all. This is to be incorporated into the dispatch on the third series of corporate tax reforms.

The press release furthermore states that in terms of content, most of the consultation participants agreed to the implementation of the Pelli motion proposed by the Federal Council. The Federal Council has instructed the Federal Department of Finance (FDF) to create the legal basis first. It is to be included in the Federal Act on Tax-Related Measures to Strengthen the Competitiveness of Switzerland as a Business Location (third series of corporate tax reforms).

The press release also states that the amendment will affect foreign companies' permanent establishments in Switzerland which have their registered office in another country with which Switzerland has a double taxation agreement (DTA). The press release continues with stating that if the permanent establishment receives dividend, interest or royalty payment revenue upon which a non-recoverable withholding tax is levied from a third country with which Switzerland has signed a DTA, double taxation can arise at present. According to the press release this can be avoided with the envisaged amendment to the ordinance.

A document titled: “Vernehmlassungsverfahren zur Verordnung über die pauschale Steueranrechnung (Umsetzung Motion Pelli - 13.3184) – Ergebnisbericht” was attached to the press release that was issued by the Swiss Federal Department of Finance.

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