The Double Taxation Relief (Taxes on Estates of Deceased Persons and Inheritances) (Switzerland) Order 1994

Made: 14th December 1994

At the Court at Buckingham Palace, the 14th day of December 1994 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 158 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Estates of Deceased Persons and Inheritances) (Switzerland) Order 1994.

2

It is hereby declared—

• (a) that the arrangements specified in the Convention set out in Part I of the Schedule to this Order and in the Protocol set out in Part II of that Schedule have been made with the Swiss Federal Council, with a view to affording relief from double taxation in relation to inheritance tax and taxes of a similar character imposed by the laws of the Swiss Confederation; and

• (b) that it is expedient that those arrangements should have effect.

SCHEDULE

PART I — CONVENTION BETWEEN THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE SWISS CONFEDERATION FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON ESTATES AND INHERITANCES

The Government of the United Kingdom of Great Britain and Northern Ireland and the Swiss Federal Council;

Desiring to conclude a Convention for the avoidance of double taxation with respect to taxes on estates and inheritances;

Have agreed as follows:

Article 1 — Estates and inheritances covered

This Convention shall apply:

• (a) to estates and inheritances where the deceased was domiciled, at the time of his death, in one or both of the Contracting States; and

• (b) to property comprised in a settlement made by a person who was domiciled, at the time the settlement was made, in one or both of the Contracting States.

Article 2 — Taxes covered

Article 3 — General definitions

Article 4 — Fiscal domicile

Article 5 — Immovable property

Article 6 — Movable property of a permanent establishment or a fixed base

Except for assets referred to in Articles 5 and 7 and in paragraph (2) of Article 8, moveable property of an enterprise which forms part of the estate of a person domiciled in a Contracting State which is the business property of a permanent establishment situated in the other Contracting State, may be taxed in that other State.

• (2) For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

• (3) The term “permanent establishment”includes especially:

• (a) a place of management;

• (b) a branch;

• (c) an office;

• (d) a factory;

• (e) a workshop; and

• (f) a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources.

• (4) A building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.

• (5) Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

• (a) the use of facilities solely for the purpose of storage, display, or delivery of goods or merchandise belonging to the enterprise;

• (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

• (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purposes of processing by another enterprise;

• (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;

• (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; or

• (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e) of this paragraph, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

• (6) Except for assets referred to in Articles 5 and 7 and in paragraph (2) of Article 8, movable property which forms part of the estate of a person domiciled in a Contracting State and used for the performance of professional services or other activities of an independent character and pertaining to a fixed base situated in the other Contracting State, may be taxed in that other State.

• (7) The provisions of paragraphs (1) and (6) of this Article shall apply to an interest in a partnership if an enterprise is carried on, or professional services or other activities of an independent character are performed, by the partnership.

Article 7 — Ships and aircraft

Ships and aircraft belonging to an enterprise which forms part of the estate of a person domiciled in a Contracting State and operating in international traffic and moveable property pertaining to the operation of such ships and aircraft, may be taxed in the other Contracting State if the place of effective management of the enterprise is situated therein.

Article 8 — Other property

Article 9 — Elimination of double taxation

• (1) Where under this Convention the United Kingdom imposes tax on an event by reference to property:

• (a) which may be taxed in Switzerland in accordance with Article 5, 6 or 7, or

• (b) which may be taxed in the United Kingdom in accordance with paragraph (2), (3) or (4) of Article 8,

the United Kingdom shall allow against so much of its tax (as otherwise computed) as is attributable to such property a credit (not exceeding the amount of the tax so attributable) equal to so much of any tax imposed in Switzerland in connection with the same event as is attributable to such property.

• (2) Subject to paragraph (3) of this Article, where the deceased was domiciled at the time of his death in Switzerland, Switzerland shall exempt from tax any property which, in relation to the same event and in accordance with Article 5, 6 or 7, may be taxed in the United Kingdom.

• (3) Where any property is exempted from tax by any provision of this Convention, it may nevertheless be taken into account in computing the tax on other property or in determining the rate of such tax.

• (4) For the purposes of this Article, tax is imposed in a Contracting State if it is chargeable under the law of that State and duly paid.

Article 10 — Miscellaneous

• (1) If the deceased was domiciled in a Contracting State at the time of his death, and:

• (a) by the law of that State any right or interest is regarded as property not falling within Article 5, 6 or 7, but

• (b) by the law of the other Contracting State that right or interest is regarded as property falling within those Articles,

then the nature of the right or interest shall be determined by the law of that other State.

• (2) Property which passes to the spouse from a deceased person who was domiciled in or a national of Switzerland and which may be taxed in the United Kingdom shall, where:

• (a) the spouse was not domiciled in the United Kingdom but the transfer would have been wholly exempt had the spouse been so domiciled, and

• (b) a greater exemption for transfers between spouses would not have been given under the law of the United Kingdom apart from this Convention,

be exempt from tax in the United Kingdom to the extent of 50 per cent of the value transferred, calculated as a value on which no tax is payable and after taking account of all exemptions except those for transfers between spouses.

Article 11 — Non-discrimination

Article 12 — Mutual agreement procedure

Article 13 — Exchange of information

Article 14 — Diplomatic agents and consular officers

Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

Article 15 — Entry into force

Article 16 — Termination

PART II — PROTOCOL TO THE CONVENTION BETWEEN THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE SWISS CONFEDERATION FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON ESTATES AND INHERITANCES

At the time of signing the Convention for the avoidance of double taxation with respect to taxes on estates and inheritances, concluded this day between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation the Contracting States have agreed as follows:

• (1) With reference to Article 4:

An individual who was a national of one of the Contracting States without being a national of the other Contracting State and who was domiciled in the State of which he was a national immediately before coming to the other State shall not be domiciled in the other State for the purposes of this Convention if:

• (a) he was temporarily present in that other State by reason only of his employment or was a spouse or other dependant of a person temporarily in that other State for such purpose; and

• (b) that individual had retained the domicile of the State of which he was a national; and

• (c) that individual had no intention of becoming a permanent resident of the other Contracting State.

• (2) With reference to paragraph (1)(b) of Article 4:

The reference to Swiss civil law concerns chapter 6 of the “Loi fédérale sur le droit international privé” of 18th December 1987.

• (3) With reference to Article 8:

The situs of any property dealt with in that Article shall be determined by the law of the United Kingdom in effect at the date of entry into force of this Convention.

Signed

R. P. Bulling — Deputy Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Convention with Switzerland is set out in Part I of the Schedule to this Order.

The Convention defines the scope of fiscal domicile separately for the United Kingdom and for Switzerland. In the case of the United Kingdom, this includes the deemed domicile rules contained in section 267 of the Inheritance Tax Act 1984. Where domicile is claimed by both countries, a deceased person’s status is determined under special rules, but subject to the Protocol set out in Part II of the Schedule (Article 4).

Immovable property which forms part of a deceased person’s estate may be taxed in the country of domicile and in the country of situs (Article 5).

The Convention gives secondary taxing rights to the country where an enterprise has a fixed place of business (Article 6), and where the management of ships and aircraft operating internationally is situated (Article 7), where such property forms part of the estate of a person domiciled in the other country.

Other property is generally taxed solely in the country of domicile or, where domicile is claimed by both countries, in the country of situs, but subject to three exceptions. The United Kingdom retains a secondary taxing right notwithstanding domicile in Switzerland: on shares in United Kingdom companies; on property situated in Switzerland where the deceased person was domiciled in the United Kingdom at death or had been so domiciled within the previous 5 years, and was a national of the United Kingdom and was not a Swiss national; on property situated in a third country if at any time within 5 years of the death the deceased had been domiciled in the United Kingdom, and was a national of the United Kingdom and was not a Swiss national (Article 8).

Where property is taxable in both countries by virtue of any of the above Articles, the Convention resolves potential double taxation: by providing for the United Kingdom to give credit for Swiss tax on immovable property and business property situated in Switzerland, and on ships, aircraft and other property where Switzerland has the primary taxing rights; by providing for Switzerland to exempt immovable property and business property situated in the United Kingdom, and ships and aircraft of United Kingdom enterprises (Article 9).

The Convention gives an exemption from the tax charge in the United Kingdom of up to 50 per cent on property in the estate of a deceased person who is either a national of Switzerland or is domiciled there under Article 4, which passes on death to his or her spouse domiciled outside the United Kingdom (Article 10).

There are provisions safeguarding nationals and their enterprises of one country against discriminatory taxation in the other country (Article 11), and for consultation (Article 12) and limited exchange of information (Article 13) between the taxation authorities of the two countries.

A Protocol to the Convention is set out in Part II of the Schedule to this Order. The Protocol clarifies certain parts of the Convention as set out in Part I of the Schedule, as follows.

Deceased persons who are nationals of and domiciled in one country (and their dependants) cannot be treated as domiciled in the other country simply because of residence there for employment purposes.

The particular rules of Swiss civil law are identified for the purpose of domicile in Switzerland.

The situs of any property affected by Article 8 of the Convention shall be determined by the law of the United Kingdom in effect at the date of entry into force of this Convention.

The Convention and the Protocol will enter into force 30 days after the date on which instruments of ratification thereof are exchanged and will apply to deaths and other chargeable events occurring after that date.

Footnotes

[^f00001]: 1984 c. 51; section 158 was amended by section 70(2) of the Finance Act 1987 (c. 16). By virtue of section 100(1) and (2) of the Finance Act 1986 (c. 41) on and after 25th July 1986 the Capital Transfer Tax Act may be cited as the Inheritance Tax Act 1984, and any reference in that Act to capital transfer tax is to have effect as a reference to inheritance tax, except where the reference relates to a liability arising before 25th July 1986.