Switzerland & Malta sign Double Taxation Agreement

Dr. Priscilla Mifsud Parker | Published on 25 Feb 2011

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Today in Rome, Switzerland and Malta signed a double taxation agreement (DTA) in the area of taxes on income. The DTA will contribute to the further positive development of bilateral economic relations and also contains provi-sions on the exchange of information in line with internationally applicable standards.
Aside from the exchange of information, Switzerland and Malta have in particular agreed withholding tax exemption for dividend payments in the case of related companies with a capital stake of at least 10% in the company making the payment. This exemption occurs so long as the participating interest is held for at least one year. These conditions also apply to interest payments being exempt from withholding tax. The DTA with Malta contains a clause on abuse, so that the envisaged withholding tax reductions are not applicable to artificially arranged business activities. In addition, most-favoured-nation treatment of Switzerland was agreed in an arbitration clause. Should Malta negotiate an arbitration clause with another country, the clause agreed between Switzerland and Malta would automatically become applicable.

The DTA with Malta contains the rule on interpretation in the case of administrative assistance recommended in mid-February 2011 by the Federal Council.

After negotiations finished, a report on the revised agreement was submitted to the Conference of Cantonal Finance Directors and the business associations concerned for their comments. They approved the signing of the agreement.

Stages between signature and entry into force

After a double taxation agreement (DTA) has been signed, the Federal Council submits the signed agreement together with a dispatch to parliament for approval. Parliament also decides whether or not a DTA will be subject to an optional referendum. Unter the current practice, DTAs that provide for significant additional obligations are subject to an optional referendum. The first ten DTAs with an extended administrative assistance clause in accordance with the internationally applicable standards were approved by parliament on 18 June 2010.

The agreement can enter into force once the partner state has provided its approval. Once ratified, the agreement will enter into force. This occurs either when diplomatic notes are dispatched or when the instruments of ratification are exchanged. The point in time of entry into force depends on the agreement reached. Most of the first ten approved agreements have since entered into force. The application of the provisions is based on the arrangements agreed in the DTA. Usually, the new provisions are applicable from 1 January of the calendar year following the date of entry into force

Division for International Affairs,
Federal Tax Administration

Switzerland

[Full List of Malta Double Taxation Agreements]


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