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Double taxation agreement with Switzerland

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NO. 24



EMBARGO c---- \



A double taxation agreement between Australia and Switzerland

was signed today in Canberra.

The agreement is a comprehensive one for the avoidance of double taxation in relation to all forms of income flowing

between the two countries. The allocation of taxing rights between the countries accords with what is set, out in Australia1 other double taxation agreements.

Under the agreement certain types of income may be taxed in full

by the country in which the income has its source. Income dealt with in this manner includes:

. income from real property (including income

from the exploitation of natural resources);

. income derived by public entertainers;

. income from employment (except in relation

. to some visits of short duration);

. business profits, if they are attributable to

a "permanent establishment" (i.e., a substantial business presence) which the recipient has in the country of source.

Other types of income may be taxed only by the country of residence of the recipient. Items falling within this category include shipping and aircraft profits derived from international operations and pensions and annuities.


A third category of income, comprising dividends, interest and royalties, may be taxed by both countries, with the country

of source limiting its tax and the country of residence allowing

credit against its tax on the income for the limited tax of the source· country. The limits on the source country tax are 15 per

cent in the case of dividends and 10 per cent in the case of interest and royalties. However, Switzerland does not levy any

tax on royalties derived by residents of other countries.

One effect of the limitations will be that interest derived by residents of Australia from sources in Switzerland, previously fully taxed in Switzerland and exempt from Australian tax, will be taxed at a reduced rate in Switzerland and also taxed in Australia with credit being allowed for the Swiss tax paid.

The legislation to apply the credit method of double taxation

relief to Swiss interest will ensure that Australian residents deriving such income before tomorrow will not pay more tax than.

they would have paid but for the new arrangements.

Other provisions in the agreement provide for such things as

exchange of information for the purpose of carrying out the agreement and consultations between the taxation authorities of the two countries.

The provisions of the agreement will not be effective until all necessary constitutional processes have been completed by both countries. Legislation will be necessary to give the agreement the force of law in Australia and a Bill for that purpose will be introduced into Parliament as soon as practicable.

When given the force of law in both countries the agreement will have effect in Australia from 1 January 1979 for withholding tax purposes and otherwise from 1 July 1979. It will have effect in relation to Swiss taxes from 1 January 1979.

Copies of the agreement will be made available to interested

persons at Taxation Offices in the capital cities.

. 2 .

CANBERRA 28 February 1980