Explanatory note

The Convention with Switzerland scheduled to this Order replaces the Convention signed in London on 30 September 1954, as amended by the Protocol signed in London on 14 June 1966 and by the Supplementary Protocol signed in London on 2 August 1974. It provides that certain trading profits not arising through a permanent establishment, interest, royalties, pensions (other than Government pensions) and the earnings of temporary business visitors are (subject to certain conditions) to be taxed only in the country of the taxpayer's residence. Government salaries and pensions are normally to be taxed by the paying Government only. Payments made for the maintenance of visiting students are (subject to certain conditions) to be exempt in the country visited. Provision is made for income from immovable property to be taxed in the country in which the property is situated. Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer's residence unless they arise from the disposal of assets of a permanent establishment which the taxpayer has in the other country. Shipping and air transport profits are to be taxed only in the country in which the place of effective management is situated.

The Dividends Article provides rules which are to apply to the taxation of dividends as long as under United Kingdom law an individual resident in the United Kingdom is entitled to a tax credit in respect of dividends paid by a company resident in the United Kingdom.

Where a United Kingdom company pays a dividend to a Swiss company controlling 10 per cent or more of its voting power, the Swiss company receiving the dividends will be entitled to a tax credit equal to one half of the tax credit which would be payable to a United Kingdom resident individual less a sum of not more than 5 per cent of the aggregate amount of the dividend and the tax credit. Where the recipient is an individual resident in Switzerland or a Swiss company controlling less than 10 per cent of the voting power of the United Kingdom company the tax credit payable will be equal to the tax credit which would be payable to a United Kingdom resident less a sum not exceeding 15 per cent of the aggregate amount of the dividend and tax credit. The rate of Swiss withholding tax on dividends paid to a United Kingdom company controlling at least 25 per cent of the voting power of a Swiss paying company will be limited to a maximum of 5 per cent. In all other cases the Swiss withholding tax will be not more than 15 per cent.

Where income continues to be taxable in both countries, relief from double taxation is to be given by the country of the taxpayer's residence. There are also provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country and for the exchange of information and for consultation between the taxation authorities of the two countries.

The Convention is, generally, to take effect in the United Kingdom for the year of assessment or financial year beginning in 1978 but the provisions for the payment of the half tax credit are to take effect for any dividend paid on or after 6 April 1975.