On May 30, 2023 the Swiss Federal Council and the Government of the Republic of Slovenia signed a protocol amending the Convention between the Swiss Federal Council and the Government of the Republic of Slovenia for Avoidance of Double Taxation with respect to Taxes on Income and on Capital, signed at Ljubljana on June 12, 1996, as amended by the Protocol signed at Ljubljana on September 7, 2012 (The Protocol).
Although signed, the Protocol has not yet entered into force. For the Protocol to enter into force, the respective ratification procedures have to have been finalized in both countries.
The Protocol a.o. amends the title and preamble of the Convention.
The new title of the Convention shall read as follows:
“Convention between the Swiss Federal Council and the Government of the Republic of Slovenia for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Tax Evasion and Avoidance”
The text of the preamble of the Convention will be replaced by:
“THE SWISS FEDERAL COUNCIL
THE GOVERNMENT OF THE REPUBLIC OF SLOVENIA
DESIRING to further develop their economic relationship and to enhance their co-operation in tax matters,
INTENDING to conclude a Convention for the elimination of double taxation with respect to taxes on income and on capital without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this Convention for the indirect benefit of residents of third States),
HAVE AGREED as follows:”.
Furthermore the Protocol ads the following new subparagraph d to Paragraph 2 of Article 23 (Elimination of double taxation) of the Convention:
“d) The provisions of subparagraph a of paragraph 2 shall not apply to income derived or capital owned by a resident of Switzerland where Slovenia applies the provisions of this Convention to exempt such income or capital from tax or applies the provisions of paragraph 2 of Article 10, paragraph 2 of Article 11 or paragraph 2 of Article 12 to such income.”.
The protocol also ads a new Article 27A (Entitlement to benefits) to the Convention. This new Article 27A contains a principal purpose test, which reads as follows:
“Notwithstanding the other provisions of this Convention, a benefit under this Convention shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of this Convention.”.
The Protocol furthermore deletes Paragraph 4 of the Additional Protocol to the Convention and renumbers the existing Paragraphs 5, 6 and 7 of the Additional Protocol to the Convention to Paragraphs 4, 5 and 6.
The full text of the Protocol can be downloaded here from the website of the Swiss State Secretariat for International Finance SIF.
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