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HMRC internal manual

Double Taxation Relief Manual

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HM Revenue & Customs
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Switzerland: double taxation agreement, Article 22: Elimination of double taxation

(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):

(a) Swiss tax payable under the laws of Switzerland and in accordance with the provisions of this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Switzerland (excluding. in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Swiss tax is computed:

(b) in the case of a dividend paid by a company which is a resident of Switzerland to a company which is resident in the United Kingdom and which controls directly or indirectly at least 10 per cent of the capital or voting power in the Swiss company, the credit shall take into account (in addition to any Swiss tax creditable under sub-paragraph (a)) the Swiss tax payable by the Company in respect of the profits out of which such dividend is paid.

(2) Where a resident of Switzerland derives income which, under the laws of the United Kingdom and in accordance with the provisions of the Convention may be taxed in the United Kingdom, Switzerland shall, subject to the provisions of paragraphs (3), (4) and (6), exempt such income from Swiss tax, provided, however, that such exemption shall apply to gains referred to in paragraph (4) of Article 13 only if taxation of such gains in the United Kingdom is demonstrated.

(3) Where a resident of Switzerland derives dividends which, in accordance with the provisions of paragraph (2) of Article 10, may be taxed in the United Kingdom, Switzerland shall allow, upon request, a relief to that person. The relief may consist of:

(a) a deduction from the Swiss tax on the income of that resident of an amount equal to the tax levied in the United Kingdom in accordance with the provisions of paragraph (2) of Article 10, such deduction shall not, however, exceed that part of the Swiss tax, as computed before the deduction is given, which is appropriate to the income which may be taxed in the United Kingdom; or

(b) a lump sum reduction of the Swiss tax; or

(c) a partial exemption of such dividends from Swiss tax, in any case consisting at least of the deduction of the tax levied in the United Kingdom on the gross amount of the dividends.

Switzerland shall determine the relief applicable and regulate the procedure in accordance with the Swiss provisions relating to the carrying out of international conventions of the Swiss Confederation for the avoidance of double taxation.

(4) A company which is a resident of Switzerland and which derives dividends from a company which is a resident of the United Kingdom shall be entitled, for the purposes of Swiss tax with respect to such dividends, to the same relief which would be granted to the company if the company paying the dividends were a resident of Switzerland.

(5) For the purposes of the preceding paragraphs, profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with the provisions of the Convention shall be deemed to arise from sources in that other State.

(6) Where any income is exempted from tax by any provision of the Convention, it may nevertheless be taken into account in computing the tax on other income or in determining the rate of such tax.