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22.028 Double taxation. Agreement with Ethiopia
22.033 Double Taxation. Agreement with Armenia
On the first day of the session, the National Council approved by 130 votes to 31 with 17 abstentions the new DTA with Ethiopia, which was signed in Addis Ababa on July 29, 2021. With this agreement, the Swiss network of agreements will be applied in East Africa for the first time.
The National Council also approved the updating of the existing DTA with Armenia by 136 votes to 30 with 17 abstentions. This DTA dates back to 2006 and has never been updated in the meantime. In the meantime, Switzerland signed the BEPS agreement, to which the DTA is now being adapted. In addition, a zero rate for group dividends (participation of 50% of the capital, holding period of 1 year, minimum investment in distributing company of CHF 2 million) and relief from the dividend residual rate of 5% (participation of 10% of the capital, minimum investment in distributing company of CHF 100,000) will now be introduced.
Accordingly, SwissHoldings welcomes the decisions of the National Council.
The bills now go to the Council of States and will be pre-considered by the WAK-S on November 4, 2022.
22.048 Automatic exchange of information on financial accounts with other partner states from 2023/2024. Introduction
Also on the first Monday of the session, the National Council approved, in each case with large majorities, the expansion of the existing AEOI network by an additional 12 states. Namely: Ecuador, Georgia, Jamaica, Jordan, Kenya, Morocco, Moldova, Montenegro, New Caledonia, Thailand, Uganda and Ukraine.
SwissHoldings supports the inclusion of these 12 countries in the AIA network. Switzerland has a great interest in ensuring that the AEOI is agreed with as many countries as possible and that they participate in the implementation of the standard.
The bill now goes to the Council of States and will be pre-considered by the WAK-S on November 4, 2022.
19.4635 Mo. Council of States (Ettlin Erich). Avoiding discrimination of Swiss by Swiss companies through uniform taxation practice
22.3396 Po. WAK-NR. Avoid disadvantaging Swiss companies through uniform taxation practice
In the second week, a motion by Council of States member Ettlin(19.4635) was rejected by 105 votes to 77. The motion would have instructed the Federal Council to amend the wording of Article 14 and Article 21 et seq. of the Federal Withholding Tax Act (SR 642.21, VStG) so that the triangular theory is applied without exception for determining the service recipient for withholding tax.
With the rejection of the motion by the National Council, the motion is now dead. SwissHoldings regrets this decision.
The direct beneficiary theory applicable to withholding tax is an unnecessary and incomprehensible Swiss unicum. Internationally common is the triangular theory, which is also applied to the Swiss profit tax. The change to the triangular theory for withholding tax proposed by the motion would have enabled a coherent treatment of the same facts for profit tax and withholding tax (see also our submission to the WAK-SR of 23 October 2021).
In contrast, a commission postulate of the WAK-N(22.3396) was accepted without opposition, which instructs the Federal Council to carry out an analysis of the Swiss taxation practice, to explain the different consequences of the triangular theory and the direct preferential treatment theory for the companies concerned and to show the potential for abuse with regard to dividend stripping. Finally, the report should provide solutions to the problems identified.
SwissHoldings supports the adoption of this postulate.
Council of States
20.026 Code of Civil Procedure. Amendment
According to the decisions of the Council of States, the Parliament, after the consultation so far, is in favor of the important introduction of a professional secrecy protection for corporate lawyers, in addition to the technical modernization. SwissHoldings welcomes this decision, which is intended to ensure that Swiss companies operating abroad have the same procedural guarantees as local companies, for example in the USA.
However, because the Council of States has not yet been able to resolve all differences, the bill will go back to the National Council and will be discussed by the RK-N on November 11, 2022. One difference, for example, is that the Council of States would like to allow the cantons to legally permit certain civil proceedings in English or in another national language. The corresponding proposal was narrowly approved by 24 votes to 20 with 1 abstention.
The revision of the Swiss Code of Civil Procedure is thus well on track and nearing completion. SwissHoldings supports the National Council’s version and remains committed to ensuring that it will ultimately prevail.
20.036 Federal decree on special taxation of large corporate groups (implementation of the OECD/G20 project on taxation of the digital economy)
In the last week of the session, the small chamber dealt with the implementation of the OECD/G20 project on the taxation of the digital economy and discussed it to the end. In doing so, it also approved the 75/25 distribution from the gross income of the supplementary tax proposed by the Federal Council. A minority of Council of States member Rechsteiner demanded a 21/79 distribution here. This proposal was clearly rejected by 30 votes to 8 with 8 abstentions.
With its decisions today, the small chamber largely follows the message proposed by the Federal Council. In the overall vote, it adopted the bill unanimously (with 1 abstention).
SwissHoldings clearly welcomes the current course of deliberations. Cf. our media release of September 28, 2022.
The bill now goes to the National Council, where it will already be pre-considered by the WAK-N on October 24. The subsequent reading in the National Council and any revision of differences is scheduled for the winter session (Nov. 28 – Dec. 26). Only if the parliamentary deliberations are already completed this year, the mandatory referendum on the amendment of the Federal Constitution can take place in June 2023 and the implementation of the OECD minimum taxation by Switzerland can take place on January 1, 2024.
SwissHoldings will continue to closely monitor the content of the deal.