For all other income and assets, Switzerland applies the “progression exemption” method for contracting states in order to avoid double taxation. As a result, Switzerland will not grant credits for foreign taxes. The only exception is the contractual rate of foreign source interest, royalties and dividends. In October 2010, an agreement was signed to begin negotiations for an agreement to tax unreported British accounts in Switzerland and other information regarding tax and banking information shared between the two states. The agreement will strengthen, among other things, cross-border tax cooperation and improve banks` access to the market. Negotiations began in early 2011 and the agreement was signed on 6 October 2011. On March 20, 2012, a protocol was signed to clarify outstanding issues. One of the most important provisions of the Swiss-China double taxation agreement concerns the taxation of capital income. Under the new contract, capital gains from the sale of shares in the ceding company`s country of residence may be taxed.
However, the beneficiary must have held at least 25% of the capital at least 12 months prior to the sale of the shares. The same tax rules apply when the beneficiary invests at least 50% of the capital in real estate in the country of the paying company. Bern, 25.09.2013 – Switzerland and China today signed a new double taxation agreement (DBA) in Beijing in the area of income and wealth taxes. It replaces the agreement in force since 1991 and contains provisions on the exchange of information, in line with the international standard currently in force. The new DBA will contribute to the positive development of bilateral economic relations between Switzerland and China, which are members of the G20. Switzerland signed its first double taxation agreement with China in 1990. The treaty was amended in 2013 and implemented by both countries in 2014. The new treaty has been described as an agreement to avoid double taxation on income and capital taxes. The new Swiss-China Double Taxation Convention applies to income from 1 January 2015. The new provisions only promote the taxation of capital income in the country of residence of the alienating society, therefore more effectively avoiding double taxation.
The protocol also provides that the herendation will be included in the agreement. Recipients of an undisclosed Swiss bank account must either pay inheritance tax or give their consent to the dive permit to be disclosed to the British authorities. This agreement largely follows the OECD`s model of agreement and Swiss policy in this regard. The Federal Council`s decision is implemented within the framework of bilateral double taxation agreements. Greater information exchange will only have a practical effect if the renegotiated agreements come into force.