Switzerland

Individual - Foreign tax relief and tax treaties

Last reviewed - 05 July 2021

Foreign tax relief

As far as a DTT is applicable, irrecoverable foreign taxes on investment income (interest, dividends) are usually credited against and up to the respective actual Swiss tax on this income. Unused credits cannot be carried forward.

For all other income and assets, Switzerland applies the ‘exemption with progression’ method with regard to treaty countries to avoid double taxation. Therefore, Switzerland will not grant a credit for foreign taxes. The only exception applies with regard to the treaty rate on foreign source interest, royalties, and dividends.

Income and wealth taxes levied in countries with which Switzerland has not concluded a DTT can neither be credited against Swiss taxes nor is the underlying income or assets exempt from Swiss taxation. However, the taxpayer may apply for a pre-tax deduction in the amount of irrecoverable foreign taxes.

Tax treaties

Switzerland has a rather exhaustive network of income tax treaties with currently over 80 jurisdictions.

Most treaties follow, in principle, the OECD model treaty. Double taxation is generally avoided by applying the ‘exemption with progression’ method, i.e. all income is considered in order to determine the applicable tax rate, but on the exempted income no taxes are actually levied. Irrecoverable foreign taxes on investment income (interest, dividends) are usually credited against and up to the respective actual Swiss tax on this income. Unused credits cannot be carried forward.

Income and wealth taxes levied in countries with which Switzerland has not concluded a DTT can neither be credited against Swiss taxes nor is the underlying income or assets exempt from Swiss taxation. However, the taxpayer may apply for a pre-tax deduction in the amount of irrecoverable foreign taxes.

Countries with which Switzerland has concluded a treaty:

Albania Hong Kong Poland
Algeria Hungary Portugal
Anguilla (2) Iceland Qatar
Antigua (2) India Romania
Argentina Indonesia Russia
Armenia Iran Rwanda
Australia Ireland Saudi Arabia (1)
Austria Israel Serbia
Azerbaijan Italy Singapore
Bahrain Ivory Coast Slovakia
Barbados (2) Jamaica Slovenia
Bangladesh Japan South Africa
Belarus Kazakhstan Spain
Belize (2) Korea (South) Sri Lanka
Belgium Kosovo St. Kitts & Nevis (2)
Brazil (1) Kuwait St. Lucia (2)
Bulgaria Kyrgyzstan St. Vincent & Grenadines (2)
Canada Latvia Sweden
Chile Liechtenstein Taiwan
China Lithuania Tajikistan
Columbia Luxembourg Thailand
Croatia North Macedonia Togo
Cyprus Malawi (2) Trinidad and Tobago (2)
Czech Republic Malaysia Tunisia
Denmark Malta Turkey
Dominica (2) Mexico Turkmenistan
Ecuador Moldova Ukraine
Egypt Mongolia United Arab Emirates
Estonia Montenegro United Kingdom
Faroe Islands (3) Montserrat (2) United States
Finland Morocco Uruguay
France Netherlands Uzbekistan
Gambia (2) New Zealand Venezuela
Georgia Norway Vietnam
Germany Oman British Virgin Islands (2)
Ghana Pakistan Zambia (2)
Greece Peru  
Grenada (2) Philippines  

Notes

  1. Treaty not yet in force (treaty will be applicable as of January 1, 2022).
  2. Treaty with United Kingdom is applicable.

Social security agreements/totalisation agreements

Switzerland has a network of social security agreements with currently over 30 jurisdictions. Switzerland also has a bilateral agreement with the European Union, covering all 27 EU-countries and adapting more or less the rules already applicable within the European Union. A similar agreement exists with the EFTA-countries. Whether a social security agreement is applicable or not is often linked to the nationality of the individual. If applicable, assigned employees can usually remain (for a limited duration) in the home country social security system and are exempted from being subject to the host country system.

Brexit - Transitional period

The United Kingdom left the EU on January 31, 2020 (Brexit). The Withdrawal Agreement provides for a transitional period until December 31, 2020, during which the United Kingdom will continue to apply EU law on the coordination of social security systems in its relations with EU member states and Switzerland. During this transitional period, Regulations (EC) No. 883/2004 and (EC) No. 987/2009 on the coordination of social security systems will continue to apply unchanged in relations between Switzerland and the United Kingdom. The United Kingdom will be treated in the same way as an EU state.

Brexit – Future regulation

It is envisaged that relations between Switzerland and the United Kingdom will be governed by new coordination rules; these new rules are currently being negotiated. Information in this regard will be published here in due course.

From 01.01.2021, the bilateral social security agreement of 1968 will temporarily apply again for a short transitional period until the future regulations come into force. In particular, this agreement allows postings in the area of social security for employees whose assignment begins after 31.12.2020.

In case an employee is posted during this transitional period each case needs to be checked specifically. 

Estate and gift tax conventions

Switzerland has concluded tax treaties on estate taxes with ten jurisdictions (Austria, Denmark, Finland, Germany, Netherlands, Norway, Sweden, the United Kingdom, and the United States). All these treaties only cover estate/inheritance taxes, while gift taxes are not covered in any of the treaties.

Tax information exchange agreements (TIEAs)

Switzerland has concluded a small number of separate TIEAs with countries with which Switzerland has not concluded an ordinary DTT. For other countries, these questions are treated within the specific DTTs. Based on recent international developments, Switzerland has renegotiated some of the DTTs with regard to these specific provisions.