Intra-group payments under the agreement with the European Union

From Article 15 of the savings agreement to Article 9 of the AEOI agreement

The most important relief for groups with companies in Lugano and in Italy does not derive from the bilateral convention. It derives from the agreement between Switzerland and the European Community of 26 October 2004 providing for measures equivalent to those laid down in the Savings Directive. That agreement, published in the Official Journal L 385 of 29 December 2004, was concluded mainly to introduce a retention tax on the interest income of EU residents with Swiss paying agents, as Chapter E.II describes. Article 15 extended to Switzerland the benefits of two EU directives on direct taxation, the Parent-Subsidiary Directive and the Interest and Royalties Directive.¹ Paragraph 1 provides that dividends paid by subsidiary companies to parent companies shall not be subject to taxation in the source state where four conditions are met. The parent company has a direct minimum holding of 25 per cent of the capital of the subsidiary for at least two years. One company is resident for tax purposes in a Member State and the other in Switzerland. Under any double tax agreement with a third state, neither company is resident for tax purposes in that third state. Both companies are subject to corporation tax without being exempted and both adopt the form of a limited company.² Paragraph 2 applies the same exemption to interest and royalty payments made between associated companies or their permanent establishments, on the same conditions of a 25 per cent holding for two years.

The savings agreement was replaced by an amending protocol of 27 May 2015, which turned it into the Agreement between Switzerland and the European Union on the automatic exchange of financial account information. The provision on intra-group payments survived the transformation and became Article 9 of the amended agreement, applicable from 1 January 2017.³ The Swiss Federal Tax Administration publishes an Italian form for Swiss parent companies that claim the exemption from Italian withholding tax on dividends. The form refers to Article 9 paragraph 1 of the agreement and to dividends distributed from 1 January 2017.⁴ The Italian implementation follows from the direct applicability of the agreement and from Articles 27-bis and 26-quater of Presidential Decree No. 600 of 1973, which transpose the Parent-Subsidiary Directive and the Interest and Royalties Directive and contain the procedural rules on exemption at source and on refunds.⁵

Conditions in detail

The conditions of Article 9 are stricter than those of the directives in their current versions. The Parent-Subsidiary Directive requires a holding of 10 per cent, and Italian law under Article 27-bis requires an uninterrupted holding of one year. Article 9 requires 25 per cent for two years.⁶ The two-year period need not be completed at the time of payment. If the holding has lasted less than two years, the Italian subsidiary must withhold tax, and the Swiss parent may claim a refund once the period has been completed. The Swiss form provides for this case with a partial relief and a subsequent claim for full refund.⁷ The requirement that both companies be subject to corporation tax "without being exempted" was long interpreted strictly by the Agenzia delle Entrate. In Resolution No. 93/E of 2007 it denied the exemption where the Swiss parent benefited from a cantonal holding privilege or any other exemption at federal, cantonal or communal level.

The Agenzia changed its position in Resolution No. 46/E of 31 July 2023. A Swiss parent company that enjoyed a partial exemption at cantonal level asked whether it could still claim the exemption for dividends from its Italian subsidiary. The Agenzia answered that a partial exemption from income tax at the level of the Swiss parent does not prevent the recognition of the benefits of Article 9. It relied on the case law of the Court of Justice of the European Union, in particular the Wereldhave Belgium judgment, according to which only a total exemption from profit tax disqualifies a company.⁸ Since the Swiss tax reform of 2020 abolished the cantonal holding, domicile and mixed company regimes, the question has lost much of its former importance for dividends. It remains relevant for royalties, because the Swiss patent box under Articles 24a and 24b of the Federal Act on the Harmonization of Direct Taxes (StHG) grants a partial exemption of up to 90 per cent on qualifying patent income at cantonal level.⁹

Notes

1. Agreement between the European Community and the Swiss Confederation providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, signed 26 October 2004, OJ L 385 of 29 December 2004, p. 30, https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:22004A1229(01), Art. 15 ("Dividends, interest and royalty payments between companies"). ↩
2. Agreement of 26 October 2004 (above), Art. 15 para. 1. ↩
3. SLCLEX, "Italian Tax Authority: Dividends Paid To The Swiss Parent Company Are Exempt", Mondaq, 15 August 2023, https://mondaq.com/italy/withholding-tax/1355122/italian-tax-authority-dividends-paid-to-the-swiss-parent-company-are-exempt (Art. 9 of the agreement as amended in 2015). On the protocol of 27 May 2015 see Chapter E.II. ↩
4. ESTV, Form SR-A, "Domanda di esonero/rimborso", Switzerland–EU agreement, Italy, https://www.estv.admin.ch/dam/estv/de/dokumente/international/formulare/int-form-euz-e-9-1-ch-ue-italia-de.pdf.download.pdf/int-form-euz-e-9-1-ch-ue-italia-de.pdf. ↩
5. Migliorini, "Dividendi percepiti da soggetti non residenti" (above) (Art. 27-bis); Legislative Decree No. 143 of 30 May 2005, "Attuazione della direttiva 2003/49/CE concernente il regime fiscale applicabile ai pagamenti di interessi e di canoni fra società consociate di Stati membri diversi", Art. 1 (insertion of Art. 26-quater into Presidential Decree No. 600 of 1973), Normattiva, https://www.normattiva.it/eli/id/2005/07/26/005G0168/ORIGINAL. ↩
6. Migliorini, "Dividendi percepiti da soggetti non residenti" (above) (10 per cent, one year, under Art. 27-bis); Agreement of 26 October 2004 (above), Art. 15 para. 1 (25 per cent, two years). ↩
7. ESTV, Form SR-A (above). ↩
8. SLCLEX (above), on Agenzia delle Entrate, Resolution No. 46/E of 31 July 2023, and the superseded Resolution No. 93/E of 2007. CJEU, judgment of 8 March 2017, C-448/15, Belgische Staat v Wereldhave Belgium and Others, ECLI:EU:C:2017:180, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62015CJ0448 (company subject to tax without being exempt; taxation at a zero rate). ↩
9. StHG, SR 642.14, Art. 24a (patents and comparable rights), Art. 24b para. 1 (reduction of 90 per cent) and Art. 25b para. 1 (overall relief limited to 70 per cent of taxable profit), https://www.droit-bilingue.ch/de-it/6/64/642.14-24a-39.html, https://www.droit-bilingue.ch/de-it/6/64/642.14-24b-40.html and https://www.droit-bilingue.ch/de-it/6/64/642.14-25b-46.html; see Chapter F.II. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of October 2026.