In Bern on 2 February 2015, Liechtenstein and Switzerland concluded negotiations on a new double taxation agreement (DTA). Now the required procedures will begin in both countries for the signing of the agreement, which should occur this summer. The DTA should be applied from 1 January 2017. However, this schedule is dependent upon the progress of the respective national approval procedures.
The DTA is a comprehensive agreement for the avoidance of double taxation on income and capital, based on the OECD recommendations. It replaces the current agreement of 22 June 1995 between Switzerland and Liechtenstein on various tax issues, which only governs the taxation of certain income. Details and the text of the agreement will be published at the time of signing.
Taxation of Penstions
The DTA will now also govern the taxation of AHV pensions. These can be taxed solely in the state of residence, and the DTA will eliminate the current double taxation of AHV pensions from Liechtenstein.
Benefits from occupational pensions are subject to taxation in the recipient's country of domicile. To take into account pensioners who in the past were not cross-border commuters in gainful employment, Switzerland will make an annual equalisation payment of CHF 450,000 to Liechtenstein. It has yet to be defined how this amount will be distributed amongst the relevant authorities.
Swiss cross-border commuters pay taxes in Switzerland
In the case of cross-border commuters, the respective state of residence will continue to retain the right of taxation. The regulations on the taxation of cross-border commuters are based on an overall view at the time of the negotiations and constitute a balanced solution.
The taxation of dividends, interest and royalty payments is now also governed by the DTA. The DTA contains solutions for this income which are comparable to those recently concluded by Switzerland in other agreements.