Switzerland, Iceland Sign Double Tax Pact

Switzerland and Iceland have signed a new double taxation agreement (DTA) which lowers withholding tax rates and provides for the exchange of information in line with international standards. It will replace the existing DTA, signed in 1998.

The treaty sets a withholding tax exemption for dividend payments from significant holdings of at least 10 percent and for dividend payments to pension funds and national banks. Royalties will be subject to tax of no more than five percent in the source state. Pensions may now be taxed at source, and contributions to pension schemes will be fully deductible in the other state. The DTA was also supplemented with an arbitration clause.

A report on the DTA was submitted to the Swiss cantons and the country’s business associations. According to the Federal authorities, the signing was “largely” approved. Lawmakers in both countries must now complete their respective domestic ratification procedures before the agreement can enter into force.