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BEPS Convention signed by Switzerland

On 7 June 2017 Switzerland signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. The Convention will serve to efficiently amend double taxation agreements in accordance with the minimum standards agreed upon in the BEPS project. As reported by the Swiss Federal Council, these minimum standards will be implemented by Switzerland either within the framework of the Multilateral Convention or through the bilateral negotiation of double taxation agreements.

It should be recalled that the OECD adopted the final outcomes of the base erosion and profit shifting (BEPS) project in October 2015. Some actions require the adjustment of double taxation agreements (DTAs). Over 100 states and territories, including Switzerland, developed a multilateral convention (BEPS Convention, formally adopted and published on 24 November 2016) to align existing DTAs efficiently.

Initially, the Swiss DTAs with Argentina, Chile, India, Iceland, Italy, Liechtenstein, Lithuania, Luxembourg, Austria, Poland, Portugal, South Africa, the Czech Republic and Turkey will be amended by the BEPS Convention. The mentioned partner states are ready to agree with Switzerland the precise wording on how the existing DTAs will be amended through the BEPS Convention. Should agreement on the technical implementation of the BEPS Convention be reached with further partner states, the corresponding DTAs will be amended by the BEPS Convention as well. Alternatively, the BEPS minimum standards can be agreed by means of a bilateral DTA amendment.

From a material point of view, the BEPS Convention is primarily aimed at implementing the BEPS minimum standards by reference to DTAs. The new provisions resulting from the BEPS minimum standards modify the description of purpose in the preamble, include a standard anti-abuse clause and adjust the provisions governing dispute resolution within the framework of mutual agreement procedures. In line with its treaty policy, Switzerland opts for the inclusion of the mandatory and binding arbitration clause provided for in the BEPS Convention.

By the end of 2017, the Swiss Federal Council will submit the BEPS Convention for public consultation. To enter into force, the Convention will undergo the standard parliamentary approval process.