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Key Points of the Protocol amending the Tax Convention between Japan and Switzerland

[Provisional translation]

  1. Exchange of information regarding tax matters between the tax authorities
    This Protocol enables the tax authorities of the two countries to exchange information regarding tax matters including bank secrecy in accordance with the international standards.
  2. Reduction or exemption of taxes on investment income in the source country
    Taxation on investment income (dividends, interest and royalties) in the source country is reduced or exempted as below:
    Current Convention 10%(Shareholding: at least 25%)
    15% (Others)
    Exemption (governments, etc.)
    10% (Others)
    Amended Convention Exemption (Shareholding: at least 50%)
    5% (Shareholding: at least 10%)
    Exemption (governments, banks, etc.)
  3. Introduction of provisions for prevention of tax avoidance
    With regard to investment income, since the scope of exemption from taxes in the source country is significantly expanded, the risk of tax avoidance by abusing the benefits of the Convention will be increased. In order to avoid such abuses, the following provisions are provided:
    • (1) Provision on the limitation of benefits
      Persons who are entitled to the benefits of the Convention are limited to those who meet certain conditions.

    • (2) Provision on transactions considered to be abuse of the benefits of the Convention
      With regard to investment income, no benefits of the Convention shall be granted if transactions are considered to be abuse of the benefits of the Convention in the light of transaction forms and purposes.

  4. Others
    In addition to the above, the following provisions are also included:
    • (1) Provisions concerning entities differently dealt with in terms of taxation between the two countries

    • (2) Provisions concerning the time limits for transfer pricing taxation (7 years from the end of the taxable year (in case shorter time limit than this is specified by domestic laws, time limits determined by the domestic laws shall be adopted))

    • (3) Provisions concerning taxation on income derived by a sleeping partner in respect of a sleeping partnership contract