Switzerland-USA Double Tax Treaty

Switzerland and the United States of America have signed a double tax treaty for the avoidance of double taxation on individuals. The treaty is one of the many signed by the Swiss Confederation.
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Convention between the United States of America and Switzerland

There is a treaty in place between Switzerland and the United States regarding the taxation of income and double taxation. First signed on the 2nd of October in 1996 and implemented into law on January 19th, 1998, the treaty became effective in exempting businesses and individuals from double taxation.

The Convention allows for maximum taxation rates which are relevant depending on the income individuals who are earning a profitable income in either Switzerland or the US. The Protocol also protects businesses and individuals from double taxation as well as information exchange.

American investors should understand that this double tax treaty can under some circumstances affect company and business operations.

General scope of the treaty

For those living in the US or Switzerland, or both, the treaty still applies and is implemented on income coming from either of the contracting states.

The regulations within the treaty explain that an entity which is taxable can include an individual, company, partnership, estate, trust or a group of people. A business or company is treated as a corporation and is required to pay corporate taxes dependant on the location of its headquarters. Additionally, a national is considered someone who was born or is a citizen in either one of the treaty countries.

We have more information on company formation and taxation on our website. You should also feel free to contact one of our consultants for more information.

Taxes covered by the treaty

The double taxation treaty allows for parties to avoid double taxation in the US and Switzerland on the following:

  • in Switzerland: the taxes covered are the federal, cantonal and communal taxes on income; they include total income, earned income, property income, business profits, etc.
  • in the United States of America: the federal income taxes imposed by the Internal Revenue Code and certain excise taxes.
The treaty also applies to other taxes which are implemented and deducted after the double taxation treaty was signed. So this means that if a new tax becomes law, the double taxation treaty still applies. On top of this, the US and Switzerland are required to notify each other of taxation changes.

With over 80 double tax treaties signed by Switzerland, it can be a complex task to understand how each one works for each nation. For more information on these treaties, feel free to contact our business incorporation agents.