Switzerland's Federal Council and Japan signed an updated double taxation agreement, containing provisions on the exchange of information in accordance with the standards set by the Organisation for Economic Co-operation and Development.

Apart from including the OECD rules on the exchange of information, key changes made to the DTA are concerned with withholding taxes. One of the changes states that withholding tax exemption has been agreed for dividends and royalty payments to companies that hold at least 50 per cent of the voting rights. Dividend payments to pension funds will also be exempt from tax in future.

Having been signed, the DTA does not automatically come into force. It still needs to be adopted by both houses of the Swiss parliament and there remains a chance of a national referendum.

DTAs including the OECD provisions of information exchange and administrative assistance remain controversial in Switzerland, as some argue it contradicts the Swiss principle of double criminality, which states that a foreign state can only ask Switzerland for administrative assistance in cases which are illegal in both countries. Famously, tax evasion is not a crime in the Alpine state.

So far, around 20 OECD-conform DTAs have been signed by Switzerland, of which 10 have already passed the Council of States, the upper house of the Swiss parliament, and are expected to be discussed in the larger National Council, the lower house of the Swiss parliament, in June. In the National Council, strong resistance against the DTAs can be expected from the right-leaning Swiss People’s Party, which, with 62 out of 200 seats, has the most members in the National Council, but no majority.