Taxes Covered by Switzerland – Unites States Tax Treaty
The double taxation treaty (DDT) might also be relevant to the taxes or taxes that are collected instead of fixed taxes after the signature date of DDT. Both states must notify one another of any amendments that are put forward to their taxation laws.
A tax on dividends is 15%. Dividends received from direct investments are subject to taxation in the source country. The rate is 5%. The threshold for direct investment has been excluded to encourage foreign investments. It has been cut from 95% to 10% ownership of the equity of a legal entity. Royalties held by an individual that has permanent resident status in any of the two countries are usually subject to taxation only in the state of residence.
Interest payments are subject to taxation. The rate is 3%, and it is imposed by the source country. It should be noted, that interest is relieved of taxation by the country in which the mentioned interest has gone up. Royalties and income are not relieved of taxation if the benefits have a residency status of one of the states, but runs a business in the other contracting state, where the income grows. The income refers to a permanent authorized in the corresponding state. Such income is considered business profit or income obtained from independent personal services.
The withholding tax implies an approach of the anti-abuse rules made for concrete types of income obtained from investments in the DDT and deals that the U.S. has sealed with other countries.
Taxation on capital gains applies to the rules formed by the OECD model. Gains on the property are subject to taxation in the state in which the corresponding property is located. Meanwhile, the gains from the sale of personal property are subject to taxation in the country of residence of the seller. In the case, if capital gains obtained in one contracting country are relating to a permanent establishment in the other country, they are subjected to taxation in the country in which the establishment is located.
Switzerland has over 80 DTT with countries from all around the world. Before opening a legal entity in Switzerland or making any other type of investments, it is important to consult the special provisions of the acceptable tax treaty in order.
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