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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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Switzerland: double taxation agreement, Article 11: Interest

(1) Interest derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

(2) The term `interest` as used in this Article means income from debtclaims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures.

(3) The provisions of paragraph (1) shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claims in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In that case the provisions of Article 7 or Article 14, as the case may be, shall apply.

(4) Where, by reason of a special relationship between the payer and the beneficial owner, or between both of them and some other person, the amount of the interest paid exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments, if treated as a dividend or distribution of a company, shall be taxed in accordance with Article 10.

(5) Interest exempted from tax under the provisions of this Article shall not be treated as a distribution of a company paying such interest by reason of any provisions in the law of either Contracting State which relate only to interest paid to a non-resident, with or without any further requirement, or which relate only to interest payments between interconnected companies, with or without any further requirements.

(6) The provisions of paragraph (5) of this Article shall not apply to interest paid to a company which is a resident of a Contracting State where:

(a) the same persons participate directly or indirectly in the management or control of the company paying the interest and the company receiving the interest, and

(b) more than 50 per cent of the voting power in the company receiving the interest is controlled, directly or indirectly, by a person or persons resident in the other Contracting State.

(7) The provisions of this Article shall not apply in respect of any interest paid under,, or as part of, a conduit arrangement.