Switzerland, Liechtenstein Sign Double Tax Deal

Switzerland and Liechtenstein have signed a new double taxation agreement (DTA), which lowers the withholding tax rates applicable to dividend and interest payments.

The DTA was signed on July 10 by Eveline Widmer-Schlumpf, the head of the Swiss Federal Department of Finance, and Vaduz Adrian Hasler, the Prime Minister of Liechtenstein. It will replace the previous agreement, signed in 1995.

Under the new DTA, the withholding tax rate on interest payments will be reduced to zero, if the beneficial owner is resident in the other state. The withholding tax rate on portfolio dividends and dividends paid to individuals will fall from 35 percent to 15 percent. Exceptions apply.

In the case of cross-border workers, the country of residence will retain the right to tax. The DTA also regulates the taxation of state pensions, which will be taxed exclusively in the state of residence. The benefits of occupational pensions will also be subject to taxation in the country of residence.

In addition, the DTA contains provisions for the exchange of information that are in line with the Organisation for Economic Cooperation and Development standard.

The new treaty will enter into force on January 1, 2017.