Circular of 1 August 2010

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Bern, 1 August 2010 

To the cantonal 
Tax administrations 

Circular 2010 
Measures Against the Unjustified Use of Tax Treaties of the Swiss Confederation (BRB 1962 / KS 1999 
Supplements 2001) 

Dear Ladies and Gentlemen 

On 14 December 14 1962, the Federal Council, based on the Federal Decree of 22 June 1951 on the implementation of international tax treaties of the Swiss Confederation for the avoidance of double taxation (SR 672.2), issued a decree concerning measures against the unjustified use of tax treaties of the Swiss Confederation (SR 672.202, hereinafter BRB1962). This Federal Council  Decree has proved useful in combating and preventing the abuse of tax treaties. 
 
In recent years, Switzerland has concluded new tax treaties that contain specific and explicit anti-abuse provisions, or added such provisions to existing tax treaties.  On 13 March 2009, the Federal Council decided that Switzerland's reservation concerning the exchange of information according to the OECD Model Convention would be withdrawn. This decision has accelerated the revision and of numerous tax treaties and the conclusion of new treaties. 

Switzerland tends to increasingly include anti-abuse provisions in its treaties. Accordingly, the number of agreements containing anti-abuse provisions has grown. 

In this context, an adaptation of the practice of the Federal Tax Administration's (FTA) practice with respect to the BRB 1962 and the circulars of 1962 and 1999 has become necessary. This revision modernizes the FTA practice and adapts it to the current  economic environment. 

This new circular letter (KS 2010) modifies the earlier 1962 and 1999 circulars with respect to Paragraph 5 ("relationship to the abuse provisions in some tax treaties "). To the extent that the previous circulars are not amended by the following paragraphs, they remain in force.

 5. relationship between anti-abuse provisions in tax treaties and BRB 1962 

If tax treaties contain anti-abuse provisions, these provisions take precedence over the provisions of the BRB 1962 and the circulars of 1962 and 1999. The inclusion of such special provisions in bilateral treaties with another Contracting State is considered to constitute lex specialis vis-à-vis Swiss internal law. 

Thus, Article 2, paragraph 2 of the BRB in 1962 and the circulars of 1962 and 1999  no longer apply, provided that tax treaties contain general or specific (related to dividend, interest or royalty payments) anti-abuse provisions. 

In the case of obvious abuse not covered by treaty provisions, the principle of general, implied, unwritten general anti-abuse rules derived from treaty interpretation applies (GAAR).  

Article 2, paragraph 2 BRB 1962  and the circulars of 1962 and 1999 continue to apply to treaties that do not contain specific anti-abuse provisions, or who contain provisions referring to the domestic law of the Contracting States. 

The FTA provides a list of the treaties which include specific anti-abuse provisions that supersede Article 2, paragraph 2 of the BRB 1962 and the Circular Letters of 1962 and 1999. The list will be updated annually.

This Circular is applicable from 1 August 2010. Decisive is the date of  maturity of the treaty favored income. 

Division for International Affairs 

Jürg Giraudi 
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