Income from capital and royalties.

Domestic law
At the federal level, Switzerland levies a withholding tax on certain types of
investment income, lottery gains and insurance benefits (anticipatory tax) (see
articles 4, 6 and 7 of the Federal Withholding Tax Law (WTL)). For investment
income, the tax is due on: (a) dividends (including other distributions of profits)
by Swiss corporations; (b) interest from bonds and debentures from Swiss
debtors and from Swiss bank deposits; and (c) profits from Swiss investment
funds. The tax is levied at source by the payer (debtor of the income) at the rate
of 35 per cent. As a rule, refund of the anticipatory tax is only allowed for Swiss
residents. Non-residents may claim a partial or total refund only under the conditions of a double taxation treaty.
In addition, dividend, interest or royalties paid to a non-resident person are not subject to the federal or to the cantonal income (profit) tax provided that these types of income are not attributable to a PE or to a fixed base in Switzerland.
It is important to mention that royalties and licence fees paid to a non-resident
licensor for the use or the right to use a patent, trademark, copyright and similar types of intellectual property are generally exempt from Swiss tax. First, they are not subject to the federal withholding tax (anticipatory tax). Second, they may trigger a limited tax liability only to the extent that they are attributable to a Swiss PE. The principle of the so-called force of attraction of the PE is not applied in Switzerland. Therefore, in order to be attributable to a PE, royalties payments must be effectively connected with it.
It follows from the above that payments for electronic commerce transactions
from Switzerland cannot be subject to the federal withholding tax. This holds true if those payments are characterized as business profits or royalties. Thus, the crucial problem of characterization of electronic commerce transactions in this framework is not of such importance.

Treaty law
In most Swiss treaties business profits are taxable in the state of the enterprise
unless the enterprise carries on business in the other contracting state through a PE (article 7 OECD model). Royalties, however, are taxable in the beneficiary’s
country of residence (article 12 OECD model). A limited tax at source is allowed
under approximately half of the treaties with Switzerland. If the royalties are
attributable to a Swiss PE or fixed base, then the rules of business profits (or independent personal services) apply (article 12 paragraph 3 OECD model).
Following the 1992 version of the OECD model, the recent Swiss treaties
characterize royalties as payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. Older treaties are based on a preceding version of the OECD model and add to this definition payments for the use of, or the right to use, industrial, commercial or scientific equipment.
The impact of the treaty provision on electronic commerce payments from a
source within Switzerland depends upon their characterization. According to
Swiss practice, even though no clarification has yet been issued by the federal tax administration, payments for the digital delivery of products are to be treated in the same way as payments resulting from the sale of physical goods. Indeed, the customer pays for the acquisition of a digital product (such as information, music, or videos). Accordingly, those payments are generally treated as business profits (or independent personal service as the case may be). Thus, the payments may be taxed in Switzerland only to the extent that they are attributable to a Swiss PE or a fixed base. This approach corresponds to the majority view expressed by the OECD technical advisory group on treaty characterization of electronic commerce payments.