The Swiss Federal Council ratified a new double taxation agreement (DTA) with Bahrain and a Protocol to revise its DTA with Kuwait on 26th August 2020. The Federal Council said that the DTA with Bahrain will lower the tax withheld at source for cross-border income. The Federal Council noted that Dividends will be taxed at just five percent at source if certain conditions are met. Meaning, the recipient beneficially owns at least 10 percent of the capital of the company paying the dividends, and 15 percent in all other cases. The new double tax agreement provides for an exemption from withholding tax at source for interest income and royalties.
The DTA also contains provisions for the exchange of request information and introduces BEPS minimum standard provisions, including the new preamble to prevent treaty shopping and to block the treaty from being used to avoid tax inappropriately.
The protocol to the DTA with Kuwait is intended to introduce provisions to counter tax base erosion and profit shifting. It includes an arbitration clause through which both countries agree to resolve long-standing double tax disputes by appointing an independent arbitrator.
The legislative bodies must approve the DTA with Bahrain and the protocol with Kuwait of the countries concerned before they can enter into force.
