Swiss Government Recommends New Double Tax Agreement with Zimbabwe
The Swiss government has proposed that parliament approve a law to ratify a new double tax agreement (DTA) signed with Zimbabwe. This move comes after the Federal Council adopted a dispatch on the DTA during its meeting on November 5, 2025. The agreement aims to enhance economic cooperation between Switzerland and Zimbabwe by reducing tax burdens on cross-border transactions.
Key Provisions of the Agreement
The DTA includes several key provisions that define the maximum rates of withholding tax for different types of income:
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Dividends: The maximum rate of withholding tax on dividends will be capped at 5% if the recipient holds at least 25% of the capital of the company paying the dividends for a period of 365 days, including the dividend payment date. If this condition is not met, the withholding tax rate will be capped at 15%.
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Interest and Royalties: For income from interest and royalties, the withholding tax at source will be limited to 7.5%.
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Technical Services Fees: The agreement sets a cap of 2.5% on withholding tax for technical services fees.
These provisions are designed to encourage investment and trade between the two countries by ensuring predictable and fair tax treatment.
Measures to Prevent Tax Evasion and Avoidance
In addition to setting tax rates, the agreement includes important measures to prevent tax base erosion and profit shifting. These include:
- A preamble stating that the DTA is not intended to create opportunities for non-taxation or reduced taxation through tax evasion or avoidance, or treaty shopping.
- Provisions to counter treaty abuse, which refers to the misuse of tax treaties for unintended benefits.
- Rules to prevent the artificial avoidance of permanent establishment status, which is crucial for determining where a business is taxed.
- Mechanisms to neutralize the effects of hybrid mismatch arrangements, which can lead to double non-taxation or reduced taxation.
- Improved dispute resolution mechanisms to address conflicts that may arise between the two countries regarding tax matters.
These elements ensure that the agreement aligns with international standards for tax cooperation and transparency.
Domestic Ratification Procedures
For the agreement to become effective, both Switzerland and Zimbabwe must complete their respective domestic ratification procedures. This typically involves parliamentary approval in each country. Once ratified, the DTA will provide a legal framework for taxing cross-border income in a manner that promotes economic growth and stability.
Impact on Businesses and Investors
Businesses and investors from both countries are expected to benefit from the agreement. By reducing the risk of double taxation, the DTA will make it more attractive for companies to operate across borders. It also provides clarity on tax obligations, which can help businesses plan their financial strategies more effectively.
The cantons and relevant business associations in Switzerland have already welcomed the conclusion of the deal, recognizing its potential to strengthen economic ties with Zimbabwe.
Conclusion
The new double tax agreement between Switzerland and Zimbabwe represents a significant step forward in fostering economic cooperation between the two nations. With clear tax rules, anti-abuse measures, and improved dispute resolution mechanisms, the agreement is poised to support sustainable investment and trade. As both countries move forward with their domestic ratification processes, the successful implementation of the DTA could serve as a model for future tax agreements in the region.