SWITZERLAND Law and Practice Contributed by: Joseph Merhai, Thomas Pasquier and Laurent Schenker, Aegis
of the assets generating the taxable income at the time the taxable benefit becomes due (ie, the effec - tive recipient), and the relevant income and underlying assets must be properly declared for Swiss tax pur - poses. However, a refund is excluded where the struc - ture is linked with tax evasion or constitutes an abuse of rights (see 5.2 Anti-Avoidance Mechanisms ). Sub - ject to certain conditions, Swiss law allows the use of a “declaration procedure” (ie, the reporting of the WHT instead of its payment), which can eliminate the cash burden (ie, payment followed by a refund). For non-resident recipients, relief is generally available to the extent provided by the applicable DTA, whether by way of a refund procedure or via a “declaration procedure”. Finally, a deemed dividend/hidden profit distribution can trigger WHT exposure at 35% and, in certain circumstances, gross-up mechanics may result in a substantially higher effective burden. 3.4 Capital Gains Private capital gains on movable assets are generally tax-exempt in Switzerland, subject to certain excep - tions. This exemption presupposes that the individu - al’s activity does not amount to a commercial activity. By contrast, capital gains realised on commercial assets are generally subject to ordinary taxation. An exception applies to gains realised on the disposal of qualified participations (ie, at least a 10% participation in a corporation; see 3.3 Passive Income ), which are only included in the tax base at 70% at the federal level and a cantonal inclusion rate that must be at least 50% (subject to cantonal law). Likewise, capital gains realised by corporate taxpay - ers are, in principle, subject to ordinary corporate income taxation, except that gains on the disposal of qualified participations benefit from participation relief
from employment relationships governed by private or public law, such as salary and ancillary benefits (eg, allowances, commissions, bonuses, profit-sharing and any benefits arising from employee participation plans). Income from self-employment is also taxable and includes all revenues derived from the operation of a commercial, industrial, artisanal, agricultural or for - estry enterprise, from the exercise of a liberal profes - sion, or from any other independent gainful activity. Non-Resident Non-resident individuals performing dependent employment in Switzerland are subject to Swiss taxation on their Swiss-source employment income, which is typically collected by way of tax at source by the Swiss employer. In addition, benefits derived from stock options are taxed proportionally based on the ratio between the total benefit and the period spent working in Switzerland, even if the options are exercised after the taxpayer has ceased working in Switzerland. 3.6 Other Income Where relevant, Swiss tax treaties typically include specific provisions regarding directors’ fees, pen - sions, and income of artists and sportspeople, gen - erally in line with the OECD MTC. 4. OECD/G20 Global Tax Reform 4.1 Pillar One – Amount B Switzerland has not yet implemented Amount B through specific domestic rules. In practice, transfer pricing in Switzerland is applied on the basis of the arm’s length principle with reference to the OECD transfer pricing guidance as an interpretative tool. Accordingly, any application of Amount B would be expected to arise through OECD-aligned practice rather than through a bespoke Swiss implementation, and no Switzerland-specific deviations have been introduced to date. 4.2 Pillar One – Amount A Amount A under Pillar One would require implemen - tation through a multilateral agreement. Negotiations
(see 3.3 Passive Income ). 3.5 Employment Income Resident
For Swiss tax residents, all income from gainful activ - ity is taxable, whether received as a one-off payment or on a recurring basis. This includes all remuneration
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