U.S., Switzerland Update Tax Treaty to Include More Retirement Plans

The United States and Switzerland entered into a new Competent Authority Arrangement (CAA), which lists pension and retirement arrangements, including individual retirement savings plans, eligible for an exemption from tax withholding on dividends received, provided all other requirements of the U.S.-Switzerland Tax Treaty are satisfied. The CAA is effective for dividends paid on or after January 1, 2020 [U.S. Internal Revenue Service (IRS) Announcement 2021-11; 2021-23 IRB 1196].

The CAA implements a provision of the September 23, 2009, Protocol to the Treaty that added individual retirement savings plans to the list of U.S. and Swiss pension or other retirement arrangements that may be eligible for beneficial treatment. The U.S. has entered into more than 55 tax treaties with foreign countries.

More Retirement Plans Allowed
The CAA revises paragraph 3 of Article 10 (Dividends) of the Treaty to provide a list of U.S. pension and other retirement arrangements that will qualify for an exemption from tax withholding. A pension or retirement arrangement will qualify for an exemption only if it does not control the Swiss company paying the dividend, and it satisfies all other requirements of the Treaty.

Here are the qualified U.S. pension or other retirement arrangements:

1. A trust providing pension or retirement benefits under an Internal Revenue Code (IRC) §401(a) plan (which includes an IRC §401(k) plan) and a profit-sharing or stock bonus plan
2. A trust described in IRC §457(g) providing pension or retirement benefits under an IRC §457(b) plan
3. An IRC §403(a) qualified annuity plan and an IRC §403(b) plan
4. A group trust described in IRS Rev. Rul. 81-100 (as amended by Rev. Rul. 2014-24, 2014-37 IRB 529, and Rev. Rul. 2011-1, 2011-2 IRB 251), provided that it is operated exclusively or almost exclusively to earn income for the benefit of pension funds for U.S. residents
5. The Thrift Savings Fund

These qualified U.S. individual retirement savings plans also now are eligible: a trust that is an individual retirement account under IRC §408; a Roth individual retirement account under IRC §408A; a SIMPLE plan under IRC §408(p); and a trust providing pension or retirement benefits under a simplified employee pension plan under IRC §408(k). The CAA also lists Swiss pension or other retirement arrangements and individual retirement savings plans that qualify for the Treaty benefit.

Jyme Mariani, Esq., is Managing Editor of Payroll Information Resources for the American Payroll Association