Corporate Taxation

Switzerland and Japan sign protocol of amendment to DTA

On 16 July 2021, representatives of Switzerland and Japan signed a protocol of amendment to the current DTA in Bern. Specifically, the implementation of the minimum standards from the MLI is in question.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) has been in force since 1 December 2019 and aims to set minimum standards for the DTA states that must be implemented.

The Protocol of Amendment signed last Friday contains the following changes:

  • an anti-abuse clause, which is intended to ensure that no wrongful use of the DTA takes place;
  • addition of the provision on the mutual agreement procedure in accordance with the minimum standard;
  • introduction of the arbitration procedure;
  • harmonization of the tax relief in the source state to 0% for dividends from a participation of 10% and for interest income.

The Protocol of Amendment will enter into force after approval by the legislatures of both countries and is not expected before 2022.

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