On 10 July 2015 Switzerland and Liechtenstein signed the revised double taxation agreement (DTA) to deepen their cross-border cooperation in tax matters based on the OECD Model Tax Convention. The DTA will enter into force on 1 January 2017 and will replace the current agreement of 22 June 1995 between Switzerland and Liechtenstein, which only governs the taxation of certain income like interest on real security claims, income from employment, pensions, capital payments and income from government service.
Withholding taxes are a central subject of the revised DTA. Dividends paid to a company (other than a partnership) resident in Liechtenstein are not subject to withholding taxes if the company has held at least 10 % of the capital of the distributing company for at least one year prior to the distribution. Similarly, dividends paid to provident institutions resident in Liechtenstein are not subject to withholding tax. In the case of portfolio dividends and dividends accruing to private investors resident in Liechtenstein, withholding taxes are reduced from 35 % to 15 %. Interest and royalties are also exempt from withholding tax, if the beneficial owner is resident in Liechtenstein.
Employed cross-border commuters are only taxed in their state of residence. However, if a cross-border commuter does not return to their state of residence after the end of work for professional reasons on more than 45 working days per year, he/she is no longer considered a cross-border commuter. Likewise, benefits from the old age and survivors’ insurance (AHV) and benefits from occupational pensions are subject to taxation in the recipient’s country of residence.
To prevent treaty abuse, two abuse provisions have been incorporated in the protocol of the DTA. Moreover, both countries agree on exchange of information by means of administrative assistance based on the OECD Model Tax Convention.