A new double taxation treaty between Switzerland and the Netherlands (the “new DTT”) contains new provisions on dividends, interest, capital gains and information exchanges.
The provisions of the new DTT apply to tax years beginning on or after January 1, 2012. Unlike the previous DTT, which it replaced the new DTT follows the OECD Model Double Taxation Convention.
The comments below address some of the most relevant features of the new DTT.
The percentage shareholding required to qualify for the dividend withholding tax exemption has been reduced from 25% to 10%. Dividend payments to pension funds or Swiss social security schemes are exempt from tax in the source state. The DTT contains an anti-abuse measure which is similar to the one contained in the former DTT. This prevents a taxpayer from invoking the benefits of the dividend article of the new DTT if the relationship between the dividend payer and the dividend payee has been established or maintained primarily for the purpose of taking advantage of the benefits of the dividend article.
Additionally, a zero withholding tax rate has been agreed for interest. Under the former DTT interest payments were subject to a non-refundable 5% withholding tax rate. This is of benefit to Dutch lenders who own Swiss bank accounts or Swiss bonds. (The Netherlands do not levy a withholding tax on interest.)
Capital gains on shares in real estate companies are specially addressed in the new DTT. Under the new DTT, capital gains derived by a resident of a contracting state from the sale of shares in a real estate company (the assets of which consist directly or indirectly of more than 50% of immovable property) may be taxed in the state where the real estate is located. There are exceptions to this rule including: (i) for listed real estate companies, (ii) where the person who derives the gain owns less than 5% of the shares in the company prior to the sale of shares, (iii) where the gains are derived during the course of a corporate restructuring, or (iv) where the real estate is used by the company for its own business.
Exchange of information
Finally, the new agreement contains provisions on the exchange of information in accordance with the OECD standard. The tax authorities of the contracting states shall provide administrative assistance upon justified and specified requests. Automatic exchange of information and so-called fishing expeditions are not permitted. The exchange of information is not limited to the taxes covered by the DTT; it applies to all applicable taxes. From the date of entry into force of the new DTT, the tax authorities of the contracting states are able to make information requests going back to March 1, 2010.