Protocol of amendment to double taxation agreement (DTA) between Switzerland and United States of America enters into force
Bern, 20.09.2019 – On 20 September 2019 in Bern, Switzerland and the United States of America exchanged the instruments of ratification of the protocol of amendment to their double taxation agreement in the area of taxes on income (DTA). The protocol, which entered into force on the same day, represents a milestone in tax relations between Switzerland and the USA.
The instruments of ratification were exchanged by State Secretary Daniela Stoffel for Switzerland and Ambassador Edward McMullen for the United States. This process was the final stage on the way to the formal entry into force of the protocol of amendment.
The two states had signed the protocol on 23 September 2009 with a view to revising their 1996 DTA. The Swiss Parliament had already approved the protocol on 18 June 2010. In the USA, the Senate is responsible for the approval, which gave the green light on 17 July 2019.
The core element of this revision is the exchange of information. There is no longer any distinction between tax evasion and tax fraud, neither for individual nor for group requests. This is in line with the international standard on the exchange of information upon request, which Switzerland applies to more than 100 states and territories, but not to date to the USA.
Requests can be made on or after the entry into force of the protocol, this means from 20 September 2019. Requests for financial accounts must relate to cases which have occurred since the date of signature of the protocol of amendment, i.e. 23 September 2009. Under the FATCA Agreement, group requests are admissible for cases from 30 June 2014.
Further provisions are: dividends to individual pension institutions – in Switzerland pillar 3a – will be exempt from withholding tax from 1 January 2020. A mandatory arbitration clause ensures that double taxation is avoided even in cases where the competent authorities cannot reach agreement in the mutual agreement procedure.
The entry into force of the protocol paves the way for a further revision of the DTA. The aim of such a revision is to make further improvements which take account of developments since the DTA was signed in 1996.