Taxation Org. Flashcards
(15 cards)
What is the main tax difference between a corporation and a partnership in Switzerland?
A corporation is a separate tax subject; a partnership is transparent and taxed at the partner level.
How does Swiss tax law treat dividend payments to foreign vs. domestic shareholders?
Foreign shareholders are subject to withholding tax (possibly reduced by DTT); domestic shareholders can reclaim it if declared.
What is the purpose of a Double Tax Treaty (DTT)?
To prevent double taxation and reduce withholding tax between two countries.
What is the arm’s length principle in transfer pricing?
Group companies must price transactions as if they were independent third parties.
Why is economic substance important in international tax planning?
Lack of substance may lead to denial of treaty benefits and tax challenges.
What does ‘territorial taxation’ mean?
Only income sourced within the country is taxed; foreign income is excluded.
What is the ‘participation exemption’ in Swiss tax law?
Dividends from qualifying shareholdings are tax-exempt at the shareholder level.
What are BEPS Actions 8–10 about?
They focus on aligning transfer pricing outcomes with value creation and preventing base erosion.
When is a permanent establishment (PE) created under a DTT?
When a fixed place of business exists or a dependent agent regularly concludes contracts.
How does Switzerland treat voluntarily disclosed undeclared foreign assets?
If first-time and voluntary, no penalties apply—only taxes and interest are due.
What is thin capitalization and why does it matter?
It refers to excessive debt vs. equity, which can lead to denial of interest deductibility.
What are typical financing options for companies and their tax implications?
Equity (no deduction) vs. debt (interest deductible); watch out for thin cap rules.
What is the notional interest deduction (NID) in Swiss tax law?
A deduction on excess equity to reduce taxable income—available in some cantons like Zurich.
What role does the ‘beneficial owner’ play in tax treaties?
Only the true economic recipient (not a conduit) is entitled to treaty benefits.
What is the impact of a warehouse or broker on permanent establishment status?
Storage alone usually does not create a PE; a broker may if they conclude contracts regularly.
