South Korea: Amended Double Taxation Treaty with Switzerland comes into force
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On 25 July 2012, the amendments to the Double Taxation Treaty (DTT) between South Korea and Switzerland came into force, to become effective as of 1 January 2013.
Under the amended treaty, the following reduced withholding tax rates are applicable:
| Rate under amended DTT | Rate under former DTT | |
| Dividends: | 15% | 15% |
| Interest, if the investor is not a bank: | 10% | 10% |
| Interest, if the investor is a bank: | 5% | 10% |
The standard withholding tax rate on Swiss interest and dividends is 35%. As Switzerland is a reclaim-only investment country, the application of a reduced tax rate under the DTT can only be achieved by way of a tax reclaim.
The standard withholding tax rate on South Korean interest is 15.4% and on South Korean dividends is 22%. A reduced tax rate under the treaty can only be achieved by holding the securities in a separate disclosed account with the custodian bank together with a personal Investment Registration Certificate (IRC).
Entry into force
The provisions of the amended DTT between South Korea and Switzerland are applicable for interest and dividends payable as of 1 January 2013.
Impact on investors
Eligible investors resident in South Korea may benefit from lower tax rates when receiving interest and dividends from Swiss securities.
Eligible investors resident in Switzerland may benefit from lower tax rates when receiving interest and dividends from South Korean securities.
[Source: Swiss Federal Tax Administration (EStV)]