Germany Switzerland Double Tax Treaty

The double taxation agreement between Germany and Switzerland

The first double taxation agreement between Germany and Switzerland was signed in 1972 and amended several times since then. The double taxation agreement between Germany and Switzerland was last amended at the end of 2011 when important provisions have been added. The revised Germany-Switzerland double taxation agreement follows the Organization for Economic Co-operation and Development Model Tax Convention. The new double taxation agreement also contains a provision about introducing an arbitration clause.

The taxation of dividends according to the new German-Swiss double tax treaty

One of the most important changes brought to the double tax convention between Germany and Switzerland refers to the taxation of distributed dividends. The new agreement provisions a new threshold of the free of charge distribution of dividends which is now 10% compared to the previous 20%. The new agreement provides that a beneficial owner must now own at least 10% of the capital within the Swiss or the German company paying the dividends. The beneficial owners must hold the 10% for at least a whole calendar year in order to benefit from the tax exemption. In case the recipient does not own the 10% participation holding for the minimum period of 12 months, the dividend tax will be 15% in both Germany and Switzerland. However, the beneficial owner will be allowed to apply for a tax refund once the 12 months period is reached. Also, German investment funds will be levied a 15% withholding tax on the dividends they pay.

Other tax rates provisioned by the Germany-Switzerland double tax agreement

The new double taxation agreement between Germany and Switzerland also covers the taxation of capital and investment income and addresses German taxpayers particularly. According to the new treaty, German citizens will be able to open bank accounts in Swiss banks. Also, German residents making investments in Switzerland will be taxed at rates ranging between 19% and 34% depending on the components of the investments made. For future capital and investment income, the tax rate will be 26.375% which is the equivalent of the German capital and investment income tax.

For detailed information about the country’s double taxation agreement with Switzerland, please contact our law firm in Germany.