I move:
That Dáil Éireann approves the following Order in draft:
Double Taxation Relief (Taxes on Income and Capital) (Swiss Confederation) Order, 1983.
a copy of which Order in draft was laid before the House on the 27th day of April, 1983.
The present double taxation Convention with the Swiss Confederation was signed on 8 November 1966 and was ratified on 16 Feburary 1968. For reasons which I will explain later, it has become necessary to amend this convention and a protocol to this effect was signed on 24 October 1980 by the Minister for Foregin Affairs on behalf of the Irish Government and the Swiss Ambassador to Ireland on behalf of his Government. A White Paper containing the text of the protocol, as signed, was subsequently laid before the Houses of the Oireachtas by the Minister for Foregin Affairs.
Under the Income Tax Act, 1967, an arrangement with a foreign Government to afford relief from double taxation will have force of law in Ireland provided the Government makes an order accordingly. Before such an order can be made, it must be laid in draft form before Dáil Éireann and a resolution approving it passed by the House.
A draft order to give the force of law to the present protocol was laid before the last Dáil on 11 June 1982 but had not been approved when the 23rd Dáil was dissolved. The draft order has since been redated and was laid before the present Dáil on 27 April 1983. It contains in its schedule the text of the amending protocol and an explanatory memorandum which sets out the effects of the protocol has been circulated. Copies of the original convention are also available in the House.
The Swiss Federal Council have approved the protocol and the Swiss Confederation are now ready for the exchange of instruments of ratification as provided for in Article VIII (1) of the protocol.
The protocol provides for revisions in the arrangements for the avoidance of double taxation of income and capital between the Swiss Confederation and Ireland. Such revisions were made necessary mainly as a result of the introduction in Ireland of the imputation system of company taxation under the Corporation Tax Act, 1976. The opportunity has also been taken to update definitions to bring them into line with the double taxation conventions entered into by this country since the present convention with Switzerland was signed in 1966. Regard was also had to the revised Model Double Taxation Convention approved by the Organisation for Economic Co-operation and Development in 1977.
I should now like to draw the attention of Deputies to the more significant provisions of the protocol. Article III of the protocol inserts a new Article 3A in the convention which deals with the matter of residence or fiscal domicile. Questions of residence are to be decided under the law of each country and in the event of both countries claiming residence on this basis, certain tests are provided for to enable an individual to be regarded, for the purposes of the convention, as a resident of one of the countries only. This article also provides that where a person other than an individual, for example, a company, is resident in both countries, that person shall be deemed to be a resident of the contracting country in which its place of effective management is situated.
Article IV substitutes a new Article 9 in the convention dealing with the treatment of dividends. The new article provides for partial payment by the Revenue Commissioners of the tax credit in respect of Irish dividends received by Swiss portfolio investors, that is, investors with a less than 25 per cent voting power in the company paying the dividend. The tax credit is not payable in the case of a direct investor, that is, a Swiss investor with at least 25 per cent shareholding.
Swiss dividends received by an Irish resident will be subject to Swiss withholding tax of 15 per cent in the case of portfolio investors and at the rate of 10 per cent in the case of direct investors. As long as Ireland does not pay the tax credit to Swiss direct investors, the Swiss withholding tax in the case of direct investors will remain at 10 per cent rather than the 5 per cent which is normal in Swiss agreements with other countries.
Article VI substitutes a new article for Article 22 of the convention and continues to ensure, as under the existing convention, that the benefit of Irish tax incentive reliefs is substantially preserved for Swiss investors in Ireland. In particular, it preserves the benefit of the Irish tax incentive reliefs for a Swiss company with a branch in Ireland qualifying for such relief, as well as the benefit of those reliefs for Swiss parent companies having at least a 20 per cent holding in an Irish subsidiary.
Article VIII provides that the protocol shall enter into force upon the exchange of instruments of ratification between the two countries.
The protocol to the existing convention ensures that the benefit of our tax incentives for Swiss investors continues to be preserved, updates our arrangements with the Swiss Confederation for the avoidance of double taxation and brings those arrangements into line with international practice generally.
I recommend that Dáil Éireann approve the draft order.
