Hi,
I am Swiss resident and I invest in other EU country. For example, I give money to someone who has a business idea but no funds and he returns it with % after some time. AFAIK, this falls into category of capital gain and is taxable in EU … but not in CH.
Should I pay taxes for such gain in the EU country while being Swiss tax resident?
At https://www.fedlex.admin.ch/eli/cc/1992/2011_2011_2011/de
I have found that:
Article 11 Interest
Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
8 Such interest may, however, be taxed in the Contracting State in which it arises, according to the laws of that State; however, if the beneficial owner of the interest is a resident of the other Contracting State, the tax may not exceed 5 per cent of the gross amount of the interest.
2a . _ 9 Notwithstanding the provisions of paragraph 2, interest paid by a resident of a Contracting State to a resident of the other Contracting State shall be taxable only in that other State if the beneficial owner is a company (other than a partnership) associated with the supplying company .
The term “interest” as used in this article means income from claims of any kind, even if the claims are secured by liens on immovable property or provided with a participation in the profits of the debtor, and in particular income from public loans and from obligations including those related thereto associated surcharges and profits from lottery loans. Late payment surcharges do not count as interest for the purposes of this article.
Paragraphs 1 and 2 shall not apply if the beneficial owner who is a resident of a Contracting State from which the interest originates carries on a commercial activity through a permanent establishment located there or is self-employed through a fixed base located there and the claim on which the interest is paid actually belongs to that permanent establishment or fixed base. In this case, Article 7 or Article 14 shall apply.
10 Interest shall be deemed to arise in a Contracting State if the debtor is a resident of that State. However, if the debtor of interest, whether or not a resident of a Contracting State, has a permanent establishment or a fixed base in a Contracting State and the debt on which the interest is paid is for the purposes of the permanent establishment or the fixed base and the permanent establishment or fixed base bears the interest, the interest shall be deemed to originate in the country in which the permanent establishment or fixed base is located.
If there are special relationships between the debtor and the beneficial owner, or between each of them and a third party, and as a result the interest, measured against the underlying claim, exceeds the amount that the debtor and beneficial owner would have agreed without these relationships, this article shall only apply to the latter amount applied. In such event, the excess amount may be taxed under the laws of each Contracting State, having regard to the other provisions of this Convention.
and
- In Switzerland, double taxation is avoided as follows:
a)19
Where a resident of Switzerland derives income or has capital which may be taxed in Poland under this Convention, Switzerland shall, subject to subparagraph b), exempt such income or capital from tax; but it may, in assessing tax on that resident’s other income or capital, apply the rate of tax which would be applicable if that income or capital were not exempt from tax. However, the exemption of the capital gains referred to in Article 13 paragraph 3a is granted only after proof of taxation of such capital gains in Poland .
b)
Where a Swiss resident receives dividends or interest or royalties that may be taxed in Poland under Articles 10, 11 or 12, Switzerland shall grant relief to that resident upon application. The relief consists of:(i)
in crediting the tax levied in Poland under Articles 10, 11 or 12 against the Swiss tax owed on the income of that resident; however, the amount to be credited may not exceed that part of the Swiss tax, as determined prior to the credit, which is attributable to the income that may be taxed in Poland; or
(ii)
in a flat-rate reduction in Swiss tax; or
(iii)
in a partial exemption of the relevant dividends, interest or royalties from Swiss tax, but at least with the deduction of the tax levied in Poland from the gross amount of the dividends, interest or royalties.Switzerland will determine the type of relief and organize the procedure in accordance with the Swiss regulations on the implementation of intergovernmental agreements to avoid double taxation.
c)20
A Swiss resident company receiving dividends from a Poland resident company enjoys the same advantages in collecting Swiss tax on those dividends as it would if the company paying the dividends were a Swiss resident.
Nonetheless, I am still confused.
Do you know how this works?
Should I pay taxes in EU and claim the refund in CH?
Should I be exempt from paying capital gains taxes in EU by letting the tax office know that I am CH tax resident?
Thanks!