Switzerland has explained how it will amend its double tax agreements after it signed the OECD’s new multilateral tax compact to implement anti-base erosion and profit shifting measures.
On June 7, Switzerland was one of 76 countries and jurisdictions to sign or express their intention to sign the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. The agreement will modify existing bilateral treaties to implement the minimum standards developed as part of the OECD/G20 BEPS Project: hybrid mismatch arrangements, treaty abuse, permanent establishment, and mutual agreement procedures.
Uniquely, Switzerland will implement the BEPS minimum standards into its tax treaties either within the framework of the Multilateral Convention or by means of the bilateral negotiation of double taxation agreements.
The Swiss Federal Council said that, initially, Switzerland’s double tax agreements (DTAs) with Argentina, Chile, India, Iceland, Italy, Liechtenstein, Lithuania, Luxembourg, Austria, Poland, Portugal, South Africa, the Czech Republic, and Turkey will be amended through the BEPS Convention.
It explained that these jurisdictions are prepared to agree with Switzerland “the precise wording on how the provisions of the existing DTAs will be amended through the BEPS Convention.”
The Council added that if agreements on the technical implementation of the Convention can be obtained with more of Switzerland’s partner states, the corresponding DTAs will then be amended. Alternatively, the BEPS minimum standards can also be agreed by means of a bilateral DTA amendment.
The Council explained that, materially, the BEPS minimum standards will result in modifications to the description of purpose contained in DTA preambles, introduce a standard anti-abuse clause, and adjust the provisions governing dispute resolution. Switzerland has also opted for the inclusion of the mandatory and binding arbitration clause provided for in the BEPS Convention.
The Council will hold a public consultation on the BEPS Convention toward the end of 2017. The Convention will undergo the standard parliamentary approval process before its entry into force.