Double Taxation Agreement Switzerland India

In countries with which Switzerland has no DTT, taxes levied on income and wealth cannot be credited with Swiss taxes and the underlying income or assets are not exempt from Swiss tax. However, the taxpayer can claim an irrecreative foreign tax deduction. Bern, 30.08.2010 – Federal Councillor Micheline Calmy-Rey and Finance Minister Shri Pranab Mukherjee today signed the protocol amending the Double Taxation Convention (DBA) on income tax. The revised DBA contains provisions for the exchange of information according to the OECD standard, which have been negotiated within the parameters adopted by the Federal Council. The protocol improves the agreement and promotes the development of bilateral economic relations. Most contracts normally follow the OECD standard contract. Double taxation is generally avoided by the application of the „progression exemption” method, i.e. all income is taken into account in determining the applicable tax rate, but no tax is actually levied on exempt income. The inescapable foreign taxes on capital income (interest, dividends) are generally credited on and up to the real Swiss tax on these incomes. Unused credits cannot be presented. Switzerland currently has a network of social security agreements with more than 30 countries.

Switzerland has also concluded a bilateral agreement with the European Union that covers all 27 EU countries and more or less adapts the rules in force in the European Union. There is a similar agreement with the EFTA countries. Whether or not a social security contract is applicable is often related to the nationality of the individual. If necessary, affected workers can normally remain (for a limited time) in the social security system of the country of origin and are exempt from the host country`s scheme. At the end of the negotiations, a report on the agreement with India was submitted for notice to the relevant cantons and relevant professional organisations. The Conference of Cantonal CFOs and professional associations have largely agreed on the signing of the agreement. Last August, India and Switzerland signed an agreement amending the existing DBAA. The revised treaty was approved by the Swiss Parliament on 17 June. Under Swiss regulations, all bilateral tax treaties are subject to public scrutiny for 100 days. In the case of the revised DBAA with India, the public review period expired on 6 October. Steps between signing and coming into force After the signing of a DBA, the Federal Council authorizes a message on the parliamentary time of knowledge responsible for approving the DBA. In current practice, DBAs, which provide for significant additional obligations, are subject to an optional referendum.

As in the past, it is up to Parliament to decide whether or not a double taxation convention should be the subject of an optional referendum. The first ten DBAs with an expanded administrative assistance clause were approved by Parliament on 18 June 2010. The deadline for the optional referendum expires on October 7, 2010. The agreement can enter into force as soon as the partner state has given its consent. The effective date depends on the agreement reached. As a general rule, the agreements apply from 1 January of the calendar year following the effective date, but the text of the agreement concerned is decisive. Compared to the current DBA, a clause of the most favoured nation could be agreed with India. With regard to dividends, interest, royalties and payments for technical services, the clause provides for the lowest withholding rate that India applies with another OECD country, which automatically applies to Switzerland.