Switzerland and Malta sign Double Taxation Agreement

Posted on 14th March 2011 in Taxation

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 provisions 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 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 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 Federal Council of Switzerland will now submit the signed agreement to parliament, which will then decide whether the DTA should be subject to an optional referendum. The agreement can enter into force once the partner state has provided its approval.

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