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Switzerland, Liechtenstein Conclude DTA Talks

Switzerland and Liechtenstein have concluded negotiations toward a new double tax agreement (DTA), which should enter into force from January 2017.

Switzerland's Federal Department of Finance (FDF) announced on February 5, 2015, that talks concluded on February 2. The FDF expects the deal to be signed this summer and, pending the completion of respective national approval procedures, for it to be applied from January 1, 2017.

The new DTA is based on the Organisation for Economic Cooperation and Development's (OECD's) model agreement, and covers income and capital. It will replace a 1995 agreement currently in force, which governs only the taxation of certain income. Maximum withholding tax rates for dividends, interest, and royalty income will be prescribed by the new DTA, with confirmation of these rates when the text of the DTA is published after its signature.

The DTA will also cover the taxation of AHV pensions. These will be taxed solely in the state of residence. In the case of cross-border commuters, the respective state of residence will continue to retain the right of taxation.

Benefits from occupational pensions will be subject to taxation in the recipient's country of domicile. To take into account pensioners who in the past were not cross-border commuters in gainful employment, Switzerland will make an annual equalization payment of CHF450,000 (USD486,900) to Liechtenstein. It has not yet been decided how this sum will be distributed among the relevant authorities.


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