Without treaties, the same income could be taxed twice—once in the source country and again in the residence country. Switzerland has over 100 double taxation agreements preventing this.
Treaties typically address:
- Which country has primary taxing rights
- Reduced withholding tax rates
- Methods for eliminating double taxation
- Information exchange provisions
- Mutual agreement procedures for disputes
Example: A Swiss company earns dividends from a German subsidiary. Without a treaty, Germany taxes at 25% and Switzerland taxes the same income. With the treaty, Germany reduces its rate to 0% for substantial holdings, and Switzerland provides a participation exemption.
A permanent establishment (PE) determines when a foreign company must pay tax in another country. PEs typically include:
- Fixed place of business (office, factory, workshop)
- Dependent agents with authority to conclude contracts
- Construction sites exceeding specific durations
Practical impact: If your Swiss company sends employees to Germany for a 15-month project, you likely create a PE and must file German tax returns.
Tax residency rules vary significantly:
Switzerland: Physical presence exceeding certain thresholds or registering intent to stay
Germany: 183 days or having a home available for use
UK: Statutory residence test with multiple factors
France: Primary home or center of economic interests
Many people inadvertently become tax resident in multiple countries, creating compliance headaches.
