S.I. No. 76/1984 - Double Taxation Relief (Taxes on Income and Capital) (Swiss Confederation) Order, 1984.

1. This Protocol shall be ratified and the instruments of ratification shall be exchanged at Berne as soon as possible.

2. This Protocol shall enter into force upon the exchange of instruments of ratification and its provisions shall have effect

(

a

) in Ireland

(i) as respects income tax, for any year of assessment beginning on or after 6 April, 1976;

(ii) as respects corporation tax, for the financial year 1974 and subsequent financial years;

(iii) as respects capital gains tax, for any year of assessment beginning on or after 6 April, 1974;

(

b

) in Switzerland

for any fiscal year beginning on or after 1 January, 1977.

3. Where any greater relief from tax would have been afforded by any provision of the existing Convention than is due under the Convention, as amended by this Protocol, any such provision as aforesaid shall continue to have effect—

(

a

) in Ireland for any year of assessment or financial year;

(

b

) in Switzerland for any fiscal year

beginning before 1 January in the calendar year in which this Protocol is signed.

IN WITNESS WHEREOF, the undersigned, duly authorised thereto, have signed this Protocol.

Done in duplicate at Dublin the 24th day of October 1980, in the English and French languages, each text being equally authentic.

Brian Lenihan

Etienne Serra

For the Government

For the Swiss

of Ireland

Federal Council

GIVEN under the Official Seal of the Government, this 6th day

of March, 1984.

GARRET FITZGERALD,

Taoiseach.

EXPLANATORY NOTE.

This Order gives the force of law to the Protocol with Switzerland which is set out in the Schedule. The Protocol amends the Convention between Ireland and Switzerland for the avoidance of double taxation with respect to taxes on income and capital which was signed on 8 November, 1966.

Article I of the Protocol amends Article 2 of the Convention so as to secure that the taxes covered by the Convention will include corporation tax introduced under the

Corporation Tax Act, 1976

, and capital gains tax brought in by the Capital Gains Act, 1975, and that the references to sur-tax and corporation profits tax which are obsolete are deleted.

Article II extends the definition of "Ireland" in Article 3 of the Convention to include designated areas of the Continental Shelf within which rights to the sea bed and sub-soil and their natural resources may be exercised by Ireland.

Article III inserts in the Convention a new Article 3A setting out the basis on which questions of residence are to be decided for the purposes of the Convention and provides rules for determining the country of residence where under the residence criteria of each country there would be a double residence position.

Article IV contains a new article relating to the treatment of dividends to be substituted for Article 9 of the Convention. Where a company which is a resident of Ireland pays a dividend to a resident of Switzerland (other than a company which controls at least 25 per cent of the voting power in the paying company) the recipient is, subject to certain conditions, to be entitled to the tax credit to which an individual resident in Ireland would have been entitled had he received the dividend and to payment of any excess of that tax credit over an income charge not exceeding 15 per cent of the aggregate of the dividend and the tax credit. Dividends received by an Irish resident from a company resident in Switzerland will be subject to Swiss withholding tax of 15 per cent but this rate is reduced to 10 per cent if the recipient is an Irish company controlling, directly or indirectly, at least 25 per cent of the voting power in the company paying the dividend.

Article V contains a new article in relation to capital gains to be substituted for Article 12 of the Convention. Capital gains arising from the alienation of immovable property or of shares of a company the assets of which consists principally of immovable property may be taxed by the country in which the property is situated. Capital gains from the alienation of other property are to be taxed only in the country of residence of the alienator unless they arise from the alienation of assets of a permanent establishment or fixed base in the other country.

Article VI substitutes a new article for Article 22 of the Convention. Broadly, the new provisions secure that where income or capital gains are not otherwise relieved from double taxation under the Convention as amended by the Protocol a measure of double taxation relief is to be granted by the country of residence of the recipient of the income or capital gains. In Ireland relief is to be given by allowing against the Irish tax on Swiss income or capital gains a credit in respect of the Swiss tax which the income or capital gains has borne, including in the case of dividends received by an Irish resident company which controls directly or indirectly 10 per cent or more of the voting power in the Swiss resident company paying the dividends, the Swiss tax payable by the company in respect of the profits out of which the dividends are paid. In Switzerland relief is to be given by exempting from Swiss tax Irish income (except dividends) or capital including capital gains derived from the disposal of shares of the kind referred to in paragraph 3 of the new Article 12 of the Convention (inserted by Article V of the Protocol) where such gains are taxed in Ireland. In the case of Irish dividends which may be charged to Irish income tax on the aggregate of the dividend and the tax credit, relief from Swiss tax in respect of such Irish tax is given by way of deduction, reduction or partial exemption as appropriate. Furthermore, a Swiss resident company which derives dividends from an Irish resident company is to be granted the same relief from Swiss tax on the dividends as would be granted if the paying company were a resident of Switzerland. The effect of these provisions in relation to relief from Swiss tax is that a measure of "matching credit" for Irish tax incentive reliefs in relation to profits and dividends will be provided.

Article VII inserts a new paragraph 3A in Article 24 of the Convention the broad effect of which is to prevent any restriction or prohibition, by reference to the country of residence of the recipient, on the allowance, for the purposes of computing taxable profits, of deductions for interest, royalties and other disbursements.

Article VIII provides that the Protocol is to have effect, in the case of Ireland, from 1976-77 onwards as respects income tax, from the financial year 1974 onwards as respects corporation tax and from 1974-75 onwards as respects capital gains tax. In Switzerland, the Protocol will operate from the fiscal year 1977 onwards. There are transitional provisions to deal with any case where greater relief from tax would be provided under the unamended Convention than would be due under the Convention as amended by the Protocol.

4. A company which is a resident of Switzerland and which derives dividends from a company which is a resident of Ireland shall be entitled, for the purposes of Swiss tax with respect to such dividends, to the same relief which would be granted to the company if the company paying the dividends were a resident of Switzerland.

5. For the purposes of the preceding paragraphs of this Article, profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with the provisions of the Convention shall be deemed to arise from sources in that other State.

6. Where any income or capital is exempted from tax by any provision of the Convention it may nevertheless be taken into account in computing tax on other income or capital or in determining the rate of such tax."

ARTICLE VII

The following new paragraph shall be inserted immediately after paragraph 3 of Article 24 of the Convention

"3A. Except where the provisions of Article 8, paragraph 6 of Article 9, paragraph 4 of Article 10 or paragraph 4 of Article 11 apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purposes of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State."

ARTICLE VIII

7. The provisions of paragraphs 1, 2 and 4 of this Article shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 6 or Article 13, as the case may be, shall apply.

8. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

9. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this Article."

ARTICLE V

The following Article shall be substituted for Article 12 of the Convention

"Article 12

CAPITAL GAINS

S.I. No. 76 of 1984.

DOUBLE TAXATION RELIEF (TAXES ON INCOME AND CAPITAL) (SWISS CONFEDERATION) ORDER, 1984.

WHEREAS it is enacted by

section 361

(1) of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), that if the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax or capital gains tax and any taxes of a similar character, imposed by the laws of the State or by the laws of that territory, and that it is expedient that those arrangements should have the force of law, the arrangements shall, notwithstanding anything in any enactment other than

section 47

of the

Finance Act, 1983

, have the force of law

AND WHEREAS it is further enacted by section 361 (6) of that Act that where such an order is proposed to be made, a draft thereof shall be laid before Dáil Éreann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann

AND WHEREAS a draft of this Order has been laid before Dáil Éireann and a resolution approving of the draft has been passed by Dáil Éireann

NOW, the Government, in exercise of the powers conferred on them by

section 361

of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), hereby order as follows