At its meeting on October 9, 2019, the Federal Council adopted the dispatch on the approval of a protocol of amendment to the agreement on the avoidance of double taxation with respect to taxes on income and capital (DTA) between Switzerland and Ukraine. The protocol implements the minimum standards for double taxation agreements and also adapts the DTA to the current treaty policy of both countries.
Switzerland and Ukraine signed the Protocol of Amendment on 24 January 2019. The cantons and interested business circles have welcomed the conclusion of the Protocol. Before it can enter into force, it must be approved by the parliaments of both countries.
The Protocol of Amendment contains an abuse clause which is based on the main purpose of a design or transaction and thus ensures that the DBA is not abused. In order to increase legal certainty for taxpayers, the agreement is also supplemented by an arbitration clause. Finally, the agreement contains an administrative assistance clause in accordance with international standards on the exchange of information on request.
For the taxation of dividends, a share of 10 percent of the distributing company will in future be regarded as a qualified interest instead of the current 20 percent. Furthermore, dividends paid to the National Bank or to the Contracting States are only taxable in the State of residence of the beneficial owner. Finally, a residual tax rate of 5 percent is now provided for both interest and royalty payments.
The press release of the Federal Council and the corresponding documents (Dispatch on the approval of a protocol to amend the double taxation agreement between Switzerland and Ukraine and the protocol) are available here.
