In the final vote on 16 March 2018, both parliamentary councillors (National Council and Council of States) adopted the Protocol amending the double taxation agreement (DTA) with Latvia. The Protocol provides, inter alia, for adjustments in the taxation of dividends, interest and royalties.
In accordance with the business of the Federal Council (17,045), a protocol on the amendment of the DTA between Switzerland and Latvia was submitted to the two parliamentary councillors (National Council and Council of States) for approval.
Both the National Council and the Council of States approved the Protocol amending the DTA between Switzerland and Latvia and the Federal Decree on the approval of the Protocol amending the DTA between Switzerland and Latvia in their final vote on 16 March 2018:
- National Council: adopted by 124 votes to 60 (9 abstentions)
- Council of States: adopted by 42 votes (unanimity)
The minutes of the two Councils are available here.
Previously, the Council of States had already unanimously approved the bill in its session of 26 February 2018 (see our contribution of 3 March 2018). The National Council had accepted the bill on 13 December 2017 (see our contribution of 16 December 2017).
In accordance with the dispatch dated 28 June 2017 concerning the approval of a protocol to amend the DTA between Switzerland and Latvia and the protocol to amend the DTA between Switzerland and Latvia, the existing DTA has been adapted to the provisions on the exchange of information in tax matters in accordance with the international standard and also in other respects to the current agreement policy of both countries and to the wording of the current OECD Model Convention.
With regard to the taxation of dividends, interest and royalties, the following adjustments were made:
- Dividends (Art. 10 DTA Switzerland - Latvia): Under the current agreement, a residual tax of 15% may be levied on dividends, which is reduced to 5% if a company has a holding of at least 20% in the distributing company. Dividends from direct holdings in companies of at least 10% of the capital can now only be taxed in the state of residence of the beneficial owner (provided that the minimum holding period of one year has already been fulfilled at the time of payment of the dividends). If the minimum holding period is not met at the time of payment, a withholding tax is withheld, which can be reclaimed as soon as the minimum holding period is met. Exclusive taxation in the State of residence also applies to dividends paid to pension funds and to the national banks of the two contracting states.
- Interest (Art. 11 DTA Switzerland - Latvia): The existing residual tax of 10% was retained. In future, however, the exclusive right of taxation of the recipient's state of residence will also apply to interest on loans between companies and bank loans as well as interest paid to pension funds.
- Licence fees (Art. 12 DTA Switzerland - Latvia): With regard to licence fees, the residual tax has been reduced from currently 10% to 5%. In addition, royalties between companies will in future be taxable exclusively in the country of residence of the beneficial owner.
The other amendments concern in particular Art. 3 (General Definitions), Art. 22a (Entitlement to Benefits), Art. 23 (Avoidance of Double Taxation), Art. 25 (Mutual Agreement Procedure) and Art. 26 (Exchange of Information) of the DTA Switzerland - Latvia as well as para. 11 of the Protocol to the Agreement on Art. 18 and 24 DTA Switzerland - Latvia (Contributions to the Pension Scheme).
