New Switzerland / the Netherlands tax treaty enters into force

November 2011

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On 9 November 2011 the new double tax treaty between Switzerland and the Netherlands, signed on 26 February 2010 in The Hague, entered into force. The treaty will generally apply as of 1 January 2012 (other than the exchange of information clause which applies with immediate effect).

The new treaty replaces the outdated original treaty which dates back to as early as 1951. One of the main reasons to renegotiate the treaty was that it lacked a proper and nowadays common OECD compliant exchange of information clause.

The entry into force of the new treaty - including the exchange of information clause - means that as of 9 November 2011, information requests may be filed (with retroactive effect until 1 March 2010) if for example the Dutch tax authorities suspect that there are Dutch tax payers with Swiss bank accounts which accounts have not been disclosed to the Dutch authorities.

During the 4th meeting of the OECD Global Forum on Transparency and Exchange of Information in Paris on 25 and 26 October 2011, an additional agreement has been signed by the Swiss and the Dutch authorities. As a result of the additional agreement, the tax authorities in order to obtain the relevant (bank account) information regarding certain persons can obtain this information without knowing the exact name of the taxpayer and/or bank concerned. Other basic information, such as bank account numbers may be sufficient basis for an exchange of information request. This additional agreement is yet to be published.

The new treaty is generally based on the 2008 OECD model tax treaty. As applies to most Dutch tax treaties, the treaty provides for a full exemption of withholding tax on interest and royalty payments. For dividends, the shareholding threshold for benefiting from a 0% withholding tax rate has been reduced from 25 per cent to 10 per cent. Dividend payments to non-qualifying shareholders may be subject to withholding tax at the rate of 15 per cent, whereas dividend payments to pension funds are fully exempt from withholding tax.

Although the content of the new treaty does not spectacularly deviates from the 1951 treaty, its standardised and up-to-date text (although the text does not yet take into account the 2010 changes to the OECD Model Treaty) plus the incorporation of a mutual agreement procedure in conformity with article 25 OECD Model, are held to ensure increased predictability and legal certainty for taxpayers needing to rely on the treaty in the years to come.