Tax Notes - August 28, 2019

Author:Mr Stefanie Gugger and Dominic Nazareno
Profession:PrimeTax AG

On July 17, 2019, the American Senate approved the long-blocked protocol of amendment of September 23, 2009, on the double taxation agreement between Switzerland and the U.S. (DTA U.S.). The main object of the protocol is to include a provision on the exchange of information in accordance with the OECD standard. The Swiss Federal Assembly approved the protocol already on June 18, 2010. It will enter into force with the exchange of the instruments of ratification.

In addition to the agreement on the protocol of amendment, it was also agreed at that time to start further negotiations on a general revision of the DTAs. In this way, improvements such as the reduction of the withholding tax on dividends from qualifying investments to 0% (so-called zero rate") were to be achieved. It can be concluded that the ratification of the protocol of amendment will now allow these outstanding renegotiations to begin. In relation to the U.S., besides the DTA provision on the exchange of information, other regulations must also be observed when it comes to the transmission of information in the fiscal area. It is therefore worth taking a closer look at them.

Administrative assistance

Mutual assistance shall mean international cooperation in administrative procedures. In the fiscal area, this includes cooperation between the tax authorities. Administrative assistance must therefore be distinguished from mutual legal assistance, which regulates intergovernmental cooperation in criminal proceedings. However, it only covers cases of tax fraud and not cases of tax evasion. In the area of administrative assistance, the standard for the exchange of information in tax matters developed by the OECD and adopted by Switzerland provides for automatic exchange of information (AEOI) and spontaneous exchange of information (SEOI) in addition to exchange of information on request. In Switzerland, all three forms of administrative assistance are implemented in various laws and ordinances. The U.S. is currently not participating in the AEOI standard. The legal bases for administrative assistance in tax matters can be found in the DTA U.S. of 1996, which, however, only cover administrative assistance in tax matters. In the area of automatic exchange of information, exists other regulations such as the Qualified Intermediary Agreement (QI) and the Foreign Account Tax Compliance Act (FATCA).These unilateral U.S. regulations, on the other hand, lack the element of reciprocity...

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