On 3 May 2018, Switzerland signed a double taxation agreement (DTA) on income with Brazil. The agreement now needs to be approved by the respective legislators in both countries. The DTA will avoid double taxation in the future and will provide legal certainty in tax matters when dealing with Brazil. 

The agreement now needs to be approved by the respective legislators in both countries. According to the State Secretariat for International Finance (SIF), the Swiss Parliament should ratify this treaty in 2019. However, the ratification process in Brazil will likely take longer and is expected at the earliest in 2020, a ratification in 2021 or 2022 is therefore more realistic.

The DTA largely follows the OECD Model Tax Treaty. The agreement takes into account the latest outcomes of the OECD Base Erosion and Profit Shifting (BEPS) initiative and contains an anti-abuse clause as well as an administrative assistance clause in accordance with the current international standard for the exchange of information upon request.

The DTA generally exempts capital gains on the sale of shares in companies located in Brazil (unless the assets of the company consist mainly of immovable property).

The residual withholding tax on dividends is limited to 10 per cent under the DTA if an investment of at least 10% has been held directly in the company for at least one year, and 15 per cent in all other cases. However, there is a zero per cent residual withholding tax on dividends from Brazil, as Brazil does not levy a withholding tax on dividends based on its domestic law.

For interest payments, the residual withholding tax generally amounts to 15 per cent. However, the residual rate is 10 per cent for specific bank loans and zero per cent for certain pension funds and government/government agencies.

With respect to royalties, the residual withholding tax is 15 per cent for royalties on trademarks and 10 per cent in all other cases.

Brazil is the most important trading partner for Switzerland in Latin America. There has not previously been any DTA between Switzerland and Brazil. The conclusion of this agreement can thus be considered as a major achievement for both countries. The DTA is expected to significantly facilitate business dealings with Brazil and to greatly increase the attractiveness of Switzerland as a location for making and holding investments in Brazil, which in turn should also prove beneficial for the business relations between Switzerland and Brazil.

Jackie Hess - Managing Partner, Tax & Legal

Jackie is the Managing Partner for Tax & Legal and a member of the Swiss Executive team. She has more than 20 years of experience serving some of Deloitte’s largest multinational clients. Her areas of focus include business model optimization in the BEPS era, Swiss ruling and tax holiday negotiations, tax controversy, and audit defense. In addition, she has extensive experience in cross-border tax planning including substance reviews, IP structuring, and finance planning. Jackie’s industry focus is life sciences where she advises predominately US-listed companies in the biotech and medtech space that have their European headquarters in Switzerland.

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Raoul Stocker - Partner, Business Tax Leader Zurich

Raoul Stocker is a tax partner with more than 15 years’ experience specifically in international tax litigation such as mutual agreement procedures and advanced pricing agreements. His focus lies on corporate tax planning, cross-border structuring of corporate transactions and businesses, transfer pricing as well as taxation of financial institutions. Raoul is also a lecturer of transfer pricing and tax law at the University of St. Gallen.

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Jacques Kistler - Partner, International Tax

Jacques is the Lead Partner of our Corporate Tax service line in the French Speaking part of Switzerland, covering international tax and M&A. He has been a full time International Corporate Tax specialist for over 23 years.

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Ferdinando Mercuri - Partner, International Tax

Ferdinando has over 15 years of professional experience within the tax consulting to companies, as well in the industrial field as in the services companies. In addition to his function of Partner at Deloitte, he also teaches tax law in Western Switzerland and he is responsible of the International Tax Module for the French part of the Swiss Tax Academy

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René Zulauf - Partner, International Tax

René has more than 15 years of experience in the field of international tax structuring, financial services tax and Mergers & Acquisitions. He specializes in cross-border tax planning and has assisted numerous multinationals in particular in the establishment of Swiss finance and IP structures, as well as in the structuring of Swiss trading and principal/headquarter operations.

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