SWITZERLAND Trends and Developments Contributed by: René Matteotti, Manuel Ulrich, Gregor Steiner and Natalja Ezzaini, Tax Partner AG
Tax Partner AG Talstrasse 80
8001 Zurich Switzerland Tel: +41 44 215 77 77 Email: reception@taxpartner.ch Web: taxpartner.ch/en
Introduction/Recent Developments Switzerland is and aims to remain a country that attracts investments. Therefore, the Swiss tax law aims to balance between attracting investments and complying with international standards regarding tax evasion and profit shifting. This article provides an update on significant develop - ments in Swiss tax law, including: • key amendments to Swiss double taxation agree - ments (DTAs) with significant trading partners; • measures to avoid double taxation for multinational enterprises (MNEs); • GloBE in Switzerland, including interdependence with incentive measures as well as potential con - flicts; and • recent court decisions. Status Update: Swiss Double Taxation Agreements Switzerland has a very extensive network of DTAs, which benefits Switzerland as a business location, especially for MNE groups. There have been signifi - cant developments regarding the DTA with Germany, and further developments are expected in relation to the DTA with the USA. Germany The DTA with Germany is one of the most important DTAs in Switzerland. However, it contains significant deviations from the OECD Model Convention, such as providing for “overarching taxation”. This refers to situations in which Germany, in certain constellations, continues to assert a comprehensive (“overarching”) right to tax despite the individual being considered resident in Switzerland under Article 4 of the DTA with Germany.
Switzerland aimed for the abolition of this overarch - ing taxation but was not successful, as Germany requested enforcement assistance, which Switzerland refused. As stipulated in Article 23 of the Additional Protocol, the new provisions will enter into force in stages, with most of them having taken effect on 1 January 2026. The overall outcome of the new Additional Protocol can therefore be described as modest. • Principal Purpose Test: notwithstanding the Prin - cipal Purpose Test, which has been newly incor - porated into the agreement with Germany in line with the minimum standard under BEPS Action 6 of the G20/OECD Inclusive Framework on BEPS, the contracting states remain entitled to apply their domestic anti-abuse provisions in addition. • Allowing top-up taxes: the new Article 24 (4) clari - fies that the contracting states are not prevented from levying an international top-up tax under the GloBE minimum tax regime. • Changes for cross-border commuters: the amend - ment includes comparatively extensive changes concerning cross-border commuter issues (Articles 15 and 15a). Given the number of cross-border commuters between Germany and Switzerland, numerous taxpayers may be affected by these amendments. For instance, when a wage exemp - tion applies, the salary must be taxed where the work would be performed if no exemption existed. In addition, the definition of “regular return to the residence” has been adjusted (see Article 15a(2)), so that a return is considered regular only if the employee travels from the residence to the work location and back on at least 20% of the agreed working days in the calendar year.
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