On May 26, 2017 the Swiss Federal Department of Finance issued a press release announcing that on May 26, 2017 the Swiss Confederation and the Republic of Kosovo signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (Hereafter: the DTA).

 

Although the DTA has been signed, it has not entered into force yet. For the DTA to enter into force, the respective ratification procedures have to have been finalized in both countries.

 

Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.

 

Residency

Article 4, Paragraph 3 of the DTA (“Resident”) arranges that where by reason of the provisions of Article 4, Paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

 

Permanent establishment

Article 5, Paragraph 3 of the DTA (“Permanent Establishment”) arranges that a building site or an assembly site constitute a permanent establishment only if such site last more than 12 months.

 

Immovable property

Article 6, Paragraph 1 of the DTA (“Income from Immovable Property”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

 

With respect to immovable property Article 13, Paragraph 1 of the DTA (“Capital Gains”) arranges that gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

 

Article 13, Paragraph 4 of the DTA arranges that gains derived by a resident of a Contracting State from the alienation of shares of a qualifying real-estate company may in general be taxed in that other Contracting State. It should be noted that Article 13, Paragraph 4 of the DTA contains specific regulations regarding real-estate companies which shares are noted at certain stock exchanges.

 

Associated enterprises

Article 9, Paragraph 2 of the DTA (“Associated Enterprises”) contains a so-called appropriate adjustment clause.

 

Article 9, Paragraph 3 of the DTA contains a so-called statute of limitation clause.

 

Dividends

If the beneficial owner of the dividends is a resident of the other Contracting State, Article 10, Paragraph 2 of the DTA (“Dividends”) maximizes the withholding tax a Source State is allowed to withhold over dividends to:

a)   5 per cent of the gross amount of the dividends in case the dividend is paid on a qualifying shareholding (minimum shareholding of 25% for a minimum holding period of 365 days); and

b)   15 per cent of the gross amount of the dividends in all other case.

 

Interest

If the beneficial owner of the interest is a resident of the other Contracting State, Article 11, Paragraph 2 of the DTA (“Interest”) maximizes the withholding tax a Source State is allowed to withhold over such interest to 5 per cent of the gross amount of the interest.

 

Royalties

Article 12 of the DTA (“Royalties”) arranges that a Source State in principle is not allowed to withhold withholding taxes over royalties if the beneficial owner of the royalties is a resident of the other Contracting State.

 

Anti-abuse clause

Article 21 of the DTA (“Entitlement to benefits”) contains a.o. a so-called Principal Purpose Test.

 

Other

Furthermore the DTA contains a.o. provisions regarding a Mutual Agreement Procedure (Article 24) and regarding the Exchange of Information (Article 25).

 

Click on the language of your choice to be forwarded to the text of the DTA in that language as available on the website of the Swiss Federal Department of Finance (German or French).

 

Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.

 


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