Tax Treaty Case Law around the Globe 2021

S. 182I. Introduction

This contribution refers to a decision of the Swiss Federal Supreme Court rendered on 6 February 2020, and involving the application of the double tax convention concluded between Switzerland and Thailand. The decision addresses the distinction between public and private pension income qualification under the tax treaty.

In Switzerland, workers subject to occupational benefit plans (known as “2^nd pillar”) save up retirement assets. The pension capital is built out of contributions made by both the employee and its employer and is entrusted to a pension fund that invests and manages it. When the employee leaves the pension fund before an insured event occurs, the pension fund must provide him with a statement showing the amount held by him in the fund; this amount is referred to as the employee’s vested benefits (or departure benefit). To ensure the continuation of the benefit plan, the vested benefits must be transferred to the pension fund of the employee’s new employer.

The rule for allocating the right to tax pension income changes completely in the OECD model depending on the type of pension. Briefly, the right to tax “public” pension income is allocated to the sta...