Double Taxation Agreements from an Individual’s Perspective

What Is a Double Taxation Agreement (DTA)?

A DTA is an international treaty between two states, designed to prevent individuals from paying taxes on the same income or assets in both countries. Switzerland has DTAs with over 100 countries, including Germany, France, Italy, Austria, and many others.

‍

When Does a DTA Apply?

A DTA applies when you:

• Live in Switzerland but earn income abroad (e.g., from rental, work, or capital)
• Have residency or a center of life in two countries
• Own property or investments abroad

‍

Key Principles of DTAs

1. Avoiding Double Taxation – Defines which country taxes which income or assets.
   • Exemption method: Residence country waives taxation, using the income only for rate determination.
   • Credit method: Foreign tax paid is credited against tax in the country of residence.
2. Allocation of Taxing Rights – DTAs specify taxation by income type:
   • Wages: usually in the country of work
   • Pensions: depends on source and residence country
   • Dividends, interest, royalties: subject to withholding tax, often reduced under DTAs
3. Avoiding Withholding Tax Double Burden – Withholding tax abroad (e.g., 15% on dividends) can be reduced or refunded if a certificate of residence is provided.

‍

Example: Swiss Resident with Property in France

A Swiss resident owns a rented holiday apartment in southern France. Rent is taxed in France because real estate is always taxed in its location country. In Switzerland, the income is declared but exempt from Swiss tax, affecting only the rate.

‍

Conclusion

DTAs promote fairness and reduce tax burdens but require careful application. Individuals with cross-border income should check DTA relevance and seek expert advice to avoid double taxation and maximize benefits.

‍

^{Book initial consultation}