Federal Council adopts two dispatches on double taxation agreements with Liechtenstein and Norway

Bern, 28.10.2015 - Today, the Federal Council adopted the dispatch on the new double taxation agreement (DTA) with Liechtenstein and on its implementation in addition to the dispatch on the revision of the DTA with Norway. Both dispatches were submitted to Parliament for approval.

The new DTA signed with Liechtenstein on 10 July 2015 is a comprehensive agreement for the avoidance of double taxation on income and capital. It replaces the current agreement of 22 June 1995 between Switzerland and Liechtenstein which only covers the taxation of certain income. The new DTA governs in particular the taxation of old age and survivors' insurance (AHV) pensions. These can be taxed solely in the state of residence, and the DTA will eliminate the current double taxation of AHV pensions from Liechtenstein for people who live in Switzerland. For cross-border commuters, the respective state of residence will continue to retain the right of taxation. The taxation of dividends, interest and royalty payments is now also governed by the DTA. The DTA contains solutions for this income which are comparable to those recently concluded by Switzerland in other agreements.

On 4 September 2015, Switzerland and Norway signed a protocol of amendment in Oslo to their DTA in the area of taxes on income and capital. The most favoured nation clause will be implemented with this protocol of amendment. The new arbitration clause ensures that double taxation will be avoided. In addition, Article 26 on the exchange of information was amended at Norway's request.

The cantons and business associations concerned have welcomed both agreements. Switzerland has concluded 52 double taxation agreements overall that are in line with the international standard on the exchange of information; 41 of these are in force.

Switzerland, Norway and Albania sign protocol to amend double taxation agreement

09.09.2015 in Tirana, Switzerland and Albania signed a protocol amending the agreement for the avoidance of double taxation (DTA) with respect to taxes on income and capital. This protocol introduces an administrative assistance clause in line with the international standard for the exchange of information upon request. The new DTA will contribute to the positive development of bilateral economic relations.

Aside from the new provision on the exchange of information for tax purposes, the agreement has been modified in other respects in line with Switzerland's current agreement policy, particularly with the introduction of an arbitration clause to ensure that double taxation is avoided. With regard to royalties, a future developments clause will enable Switzerland to benefit from any more favourable DTAs that Albania subsequently enters into with a country in the European Union (EU) or European Economic Area (EEA). Finally, an anti-abuse clause will preclude the use of the agreement by persons who are not entitled to the benefits it grants.

After negotiations finished, the protocol amending the agreement was initialled on 19 February 2015. It was then submitted to the cantons and the business associations concerned for consultation, and it did not encounter any opposition. It still has to be approved by parliament in both countries before it can enter into force.

Switzerland and Norway sign protocol to amend double taxation agreement

On 4 September 2015 in Oslo, Switzerland and Norway signed a protocol amending the agreement for the avoidance of double taxation (DTA) with respect to taxes on income and capital. This protocol introduces an arbitration clause in line with the OECD Model Tax Convention and Switzerland's current agreement policy. The new DTA will contribute to the positive development of bilateral economic relations.

Switzerland and Norway amended their agreement in 2009 in order to add a provision on the exchange of information in line with the international standard. At that time, a most favoured nation clause was also agreed in Switzerland's favour in the event of Norway agreeing to an arbitration clause with another partner. This protocol of amendment implements that most favoured nation clause and introduces an arbitration clause that ensures double taxation is avoided. At Norway's request, Article 26 on the exchange of information has also been updated.

After negotiations finished, the protocol amending the agreement was initialled on 13 March 2015. It was then submitted to the cantons and the business associations concerned for consultation, and it did not encounter any opposition. It still has to be approved by parliament in both countries before it can enter into force.

Switzerland has signed a total of 52 double taxation agreements in line with the international exchange of information standard, and 41 of these are in force.

Swiss repay Norwegian creditors after huge fraud

Geneva authorities seized the funds in 2011 from an account in the BSI bank linked to the former head of bankrupt Norwegian oil rig builder Thule Drilling, Hans Eirik Olav, who has since been convicted of embezzling $6m from the company and is serving a four-year prison term.

Geneva prosecutor Claudio Mascotto told AFP the conviction last month in the Swiss city of one of Olav's accomplices had made it possible to finally hand some 700,000 francs ($730,000, 650,000 euros) back to Thule’s creditors, who are owed around $300 million after the company's spectacular 2010 collapse.

The bankruptcy was one of the largest in Norwegian history, and Pierre Bydzovsky, a Geneva-based lawyer for the estate, said the $6 million siphoned off in early 2008 provided the "death blow" that sent Thule over the edge.

The Norwegian court documents in the case against Olav, who is appealing his January conviction, read like a thriller.

They detail how millions went up in smoke through dubious money transfers ping-ponging between a range of foreign banks and even trading hands with one of Norway's most renowned drug traffickers.

The BSI account had been controlled by US citizen Ronald Lekarz, who Olav brought in as a highly-paid consultant in 2007 to help Thule resolve a damaging conflict with a shipyard owner in the United Arab Emirates.

Lekarz was found guilty by a Geneva court last month of misappropriation and money laundering, ending his lengthy struggle to regain control of the BSI account.

"This is a battle that has lasted four long years," Bydzovsky told AFP, saying he was "relieved and happy" that the money would finally be returned to Thule creditors.

But he pointed out that the money set to be returned was only a fraction of the amount taken in 2008, with most vanishing through a web of bank transactions and front companies before Swiss authorities became suspicious.

"We regret that the financial intermediaries did not react faster when the money first arrived in Switzerland," he said, adding that "I would have liked to see a faster intervention which could have blocked all of the funds."

Norwegian prosecutor in the case against Olav, Elisabeth Harbo-Lervik, lauded Swiss authorities for their quick action.

"We are very pleased that Switzerland froze the assets that were in that account when this came to their attention. If they had not acted as quickly as they did, it is very likely there would be nothing left at all," she told AFP, speaking in Norwegian.

She said she was thrilled some $700,000 would now be returned to the Thule estate.

"Criminal acts should not pay, so it is very good that the profit from this crime will be handed over to the victims," she added.

Bydzovsky meanwhile has not given up hope of retrieving another slice of the missing cash.

He is looking into a suspicious $1.5-million transaction by Geneva financial management company Profilgest, which opened and managed a number of Swiss accounts for a company called Strategic Alliances Corporation (SAC).

The Oslo court determined SAC was entirely owned and controlled by Olav and Lekarz, finding no evidence supporting their claim that anonymous “Saudi interests", including members of the royal family, were the real owners.

Profilgest among other things helped transfer $5.5 million from Thule Drilling to a Julius Baer account held by SAC in January 2008.

Olav himself, who shortly after that transfer was able to buy a pricey boat and a lithograph by Norwegian master Edvard Munch in cash, insisted the transaction was legitimate.

Profilgest managed a number of other transactions for SAC, including investing $1.5 million under Profilgest's own name in shares in Norwegian company Dynapel.

"I think the rest of the money is probably gone, but for that $1.5 million, I have a trail to follow," Bydzovsky said.