Impact of the Double Tax Treaty between Switzerland and Argentina


With the conclusion of the ratification procedure, the Double Tax Treaty (DTT) between Switzerland and Argentina for the avoidance of double taxation with respect to taxes on income and on capital, completed in Bern on 20 March 2014, will enter into force on 27 November 2015. The convention will replace the provisional convention of 1997 that has been terminated by Argentina on 16 January 2012, and therefore ends the contract-free period. The rules under the treaty will be applicable starting from 01 January 2016, with the exception of source taxation for which relief can be claimed retroactive for 2015.[1]

Brief summary of the new convention

The convention primarily provides legal certainty and aims to avoid double taxation with respect to taxes on income and capital between Switzerland and Argentina. The new rules are comparable to the original convention from 1997, with a slight deterioration in favor of Argentina. The essential aspects of the treaty in particular with respect to the source taxation of dividends, interest and royalties are outlined below.


The provisions referring to dividend payments is in accordance with the one from the double tax convention of 1997. Article 10 paragraph 2 of the new treaty provides a limitation of the withholding tax to 10 per cent if the beneficial owner is a corporation (other than a partnership) which holds directly at least 25 per cent of the capital. In all other cases, the withholding tax is 15 per cent of the gross amount of the dividend payment, if the payment does not exceed the cumulated taxable profits of the company paying the dividends.[2] In the latter case, figure 9 letter b of the protocol provides a definitive tax of 35 per cent (so-called “Equalization Tax“) for which no relief is provided under the new convention.


Article 11 paragraph 2 of the convention provides a limitation of the withholding tax to 12 per cent of the gross amount of the interest paid (exceptions apply under paragraph 3). Switzerland generally does not levy a withholding tax on interests paid on commercial loans. Under Argentinean law however, interest payments to a foreign resident are subject to withholding tax of 15.05 to 35 per cent, depending on their nature.[3]


Under Argentinean law, royalties paid to a foreign resident are subject to a withholding tax of on different rates, depending on their nature. According to Article 12 paragraph 2, the convention provides a limitation of the withholding tax to 3 to 15 per cent, in particular:[4]

  • (a) 3 per cent of the gross amount paid for the use of, or the right to use, news;
  • (b) 5 per cent of the gross amount paid for the use of, or the right to use, copyright of literary, dramatic, musical or other artistic work (but not including royalties in respect of motion picture films and works on film or videotape or other means of reproduction for use in connection with television);
  • (c) 10 per cent of the gross amount paid for the use of, or the right to use, industrial, commercial or scientific equipment or any patent, trade mark, design or model, plan, secret formula or process, computer software or for information concerning industrial or scientific experience including payments for the rendering of technical assistance; and
  • (d) 15 per cent of the gross amount of the royalties in all other cases.

As Switzerland does not levy any withholding tax on royalties, the provisions under paragraph 2 apply to royalty payments from Argentina to a Swiss resident only.

Capital gains

Article 13 paragraph 5 (considering the exception provided in paragraph 4) provides a limitation of the withholding tax on capital gains derived from the alienation of shares to 10 per cent if the beneficial owner directly holds at least 25 per cent of the capital and to 15 percent in all other cases (same as for dividend taxation).[5]

Further amendments

A major change compared to the previous convention of 1997, is the inclusion of article 25 with respect to the information exchange. In line with the current international standard on information exchange, the new treaty facilitates the exchange of information upon request.

Impact on Swiss corporations

Even though the new DTT does not vary significantly from the previous version of 1997, it primarily provides legal certainty for Swiss corporations with investments in Argentina. While the previous version has never been ratified and has been terminated in 2012, the newly signed treaty introduces a new legal base. From a pure cash tax perspective, the DTT does not provide better WHT rates on dividends as set forth by Argentine internal law.

However, the limitation to 10% taxation in the DTT with Switzerland concerning capital gains (M&A transaction relevant cash tax outflows which are usually burdensome as transferred from sellers to buyers or requiring the acquisition of complex intermediary structures), could open planning opportunities as Argentine internal law stipulates a taxation at 13.5% on gross sales proceed or 15% on actual capital gain.

For more information on the topic discussed above, including what it means in practice or for other tax questions, contact your local PwC engagement team or me.

[1] Staatssekretariat für internationale Finanzfragen (29.10.2015), Grünes Licht für das Inkrafttreten des DBA zwischen der Schweiz und Argentinien (
[2] Abkommen zwischen der Schweizerischen Eidgenossenschaft und der Republik Argentinien zur Vermeidung der Doppelbesteuerung auf dem Gebiet der Steuern vom Einkommen und vom Vermögen (DBA-AR), S. 26 (
[3] PwC, Worldwide Tax Summaries – Corporate Taxes 2015/16, S. 58-59, Botschaft zu einem neuen Doppelbesteuerungsabkommen zwischen der Schweiz und Argentinien, S. 8601 (
[4] DBA-AR, S. 29;, S. 11-12.
[5] DBA-AR, S. 30-31.
Daniel Gremaud
Leader Tax & Legal Services Romandie (Western Switzerland)
Avenue C.-F. -Ramuz 45
1001 Lausanne
Tel. +41 58 792 81 23
Matthias Marbach
Director Tax & Legal Services
Birchstrasse 160
8050 Zürich
Tel. +41 58 792 44 76

Swiss Supreme Court: tax-privileged quasi-merger status is only granted if the receiving company is issuing its own shares

Swiss Supreme Court denies qualification of a specific transaction as a quasi-merger and hence as a Swiss tax-neutral restructuring

In Switzerland, the quasi-merger is not formally stipulated under Swiss merger law. Yet, in Swiss tax practice, quasi-mergers typically qualify as tax neutral restructurings (“tax privileged” restructurings), if certain criteria are met.

According to Swiss Tax Administration Circular Letter No. 5, “Reorganisations”, a Swiss tax-privileged quasi-merger usually requires that the receiving company takes over at least 50% of the target’s voting power. In addition, the target’s shareholders may receive a maximum of 50% of the total consideration in cash for their previously held shares in the target. Consequently at least 50% of the total consideration must be paid in new shares (of the receiving company). Typically, the receiving company procures the shares for the share-exchange by way of a capital increase.

In the case at hand, individual A held 100% of the shares of X-AG and 50% of the shares in Y-AG as part of his private wealth. In 2007, A transferred his interest of 50% of Y-AG at book value to X-AG. Subsequently, A held his interest of 50% in Y-AG indirectly via X-AG.

In its decision of 10 June 2015 (2C_976/2014), the Swiss Supreme Court confirmed Circular Letter No. 5 and ruled that in the absence of an increase of the capital level of X-AG, the transfer of the Y-shares does not qualify as a quasi-merger for Swiss tax purposes. As a result, the difference between the market value and the book value of the 50% interest in the Y-shares was subject to Swiss stamp duty on the issuance of capital.

Companies and individuals engaging in quasi-mergers must therefore carefully structure a transaction in order to ensure qualification as a tax neutral reorganisation.