267L Application of this Chapter to certain payments made to companies in Switzerland

Summary

This section provides benefits comparable to those in the 2003 EU Interest & Royalties Directive to companies resident in Switzerland.

The background to this is the agreement between the EU and Switzerland under which Switzerland undertook to adopt equivalent measures to those in the EU Savings Directive.

Implementation of the Savings Directive was conditional on, amongst other things, agreements being entered into with certain countries, including Switzerland. An agreement was concluded between the EU and Switzerland in 2004. One of the terms of the agreement with Switzerland was that Swiss companies would be afforded the benefits of the 2003 Interest & Royalties Directive. This section provides for this.

Under the agreement with Switzerland, interest and royalty payments of the type covered by the Directive made by companies in Ireland to certain Swiss companies are to be paid without deduction of tax. The conditions under which they are to be paid in full are set out in the section.

The principal conditions are:

• the recipient must be a company resident in Switzerland (and not resident outside the EU or Switzerland under a tax treaty) or be a Swiss branch of a company of another Member State,
• the recipient must be liable to tax in Switzerland, and
• the company must be a type of company specified in the agreement with Switzerland.

The new rules apply from 1 July 2005.

Details

The section applies to payments of interest and royalties, as defined in section 267G, made to certain companies as follows:

• (1)(b) payments made for the benefit of a permanent establishment in Switzerland through which a company (meaning a company of a Member State – see section 267G) carries on business in Switzerland provided that, under the terms of the Directive, the permanent establishment would be treated as being the beneficial owner of the interest or royalties.
• in any other case, payments to a company which satisfies three criteria:
  • (1)(a)(i) it is the beneficial owner of the interest or royalties,
  • (1)(a)(ii) it is tax resident in Switzerland, and
  • (1)(a)(iii) it is not treated under a tax treaty entered into by Switzerland as being resident in a country other than Switzerland or an EU Member State.

(2) Sections 267G to 267I apply to payments within the scope of the section and as outlined in subsection (1). Those sections implement the EU Interest & Royalties Directive. Section 267J is not applied because giving credit for tax deducted is not relevant in the context of Switzerland.

(2)(a) Sections 267G to 267I are applied subject to certain modifications. Firstly, they apply as if any reference in these sections to an EU Member State includes a reference to Switzerland.

(2)(b) Secondly, they apply as if any reference in these sections to a company of a Member State includes reference to companies of the types mentioned in the agreement between the EU and Switzerland.

(2)(c) Finally, they apply as if a reference in those sections to tax includes tax in Switzerland that corresponds to income tax or corporation tax in the State.

(3) Section 267K, which denies relief from withholding tax unless it can be shown that the transaction concerned is a bona fide commercial transaction and is not part of a tax avoidance arrangement, applies also to the provisions of the section.

(2) The section applies as respects a payment made on or after 1 July 2005. That is the date on which the EU Savings Directive came into effect.

Relevant Date: Finance Act 2021