Switzerland

Swiss Corporate Tax Reform III 

Since 2007, Switzerland’s privileged taxation of holdings, mixed and domiciliary companies has been under increasing international pressure, in particular from the European Union. The federal and cantonal governments have reacted and are currently reshaping the Swiss tax legislation. After having published its final report on “Measures to strengthen the competitiveness of the Swiss tax system” in December 2013, the Federal Council initiated the consultation phase on 22 September 2014 with the publication of a legislative draft for Corporate Tax Reform III.
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Measures to retain Switzerland’s attractiveness as a business location

 

The aim of Corporate Tax Reform III is to maintain and further develop Switzerland’s position as one of the most attractive business locations worldwide, while increasing international acceptance of its corporate tax legislation and sustainably securing adequate tax revenues to finance public activities.

 

The focus is on providing legal certainty and security of investment while also increasing the general competitiveness of the tax system and abolishing special tax regimes.

 

The legislative draft is based on the following pillars:

 

  • Introduction of a license box at the cantonal level
    The proposed license box will help retain and encourage investment in Switzerland. This will be achieved by providing an incentive to retain and commercialize existing patents, to develop new, innovative patented products, and also by encouraging companies to relocate related high-value jobs to Switzerland.
  • Notional interest deduction
    The draft suggests the introduction of a notional interest deduction on a company’s “higher-than-average” equity. This will support the retention of financing functions in Switzerland, and should generally favor companies that are well financed with equity.
  • Step-up mechanism to reveal hidden reserves
    The proposed step-up mechanism aims to ensure planning certainty both for taxpayers and the authorities. It will establish a consistent tax treatment of companies relocating to or from abroad, when entering or leaving a license box or in terms of tax exemptions.
  • General lowering of cantonal corporate income tax rates
    Cantons are free to decrease their cantonal and communal corporate income tax rates within the boundaries of their budget. Certain cantons have already announced new target rates; Vaud for example will decrease its rate to 13.79%.
  • Further measures
    The draft contains further measures, such as the abolishment of the stamp issuance duty, changes to offset loss carry forwards, amendments to the participation deduction, capital gains for privately held securities, and amendments to the partial taxation of participation income.

 Percentage of tax revenues originated from privileged taxed companies

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Stay on top of the current developments regarding the Swiss Corporate Tax Reform III

The consultation procedure for the legislative draft will last until early 2015, after which the Federal Council will prepare the final proposal for discussion within the Parliamentary chambers and commissions. If no referendum is held, it can be assumed that the new legislation will come into force by January 2019.

 

KPMG in Switzerland is closely following the efforts of decision makers from both the political and the industry perspective. Hence, our tax experts are able to regularly provide you with prompt and comprehensive in depth insights.

 

Should you wish to discuss and review the tax planning set-up of your group in Switzerland in the light of these changes, please contact us.

Peter Uebelhart

Peter Uebelhart

Head of Tax

+41 58 249 42 24

Stefan Kuhn

Stefan Kuhn

Partner, Head of International Corporate Tax

+41 58 249 54 14

Webcast recording 2014

Insights on the most important points and relevant implications of the legislative draft on the Swiss Corporate Tax Reform III.

 

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Comparison of the legislative draft

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Comparative overview of the detailed legislative draft regulations and the actual Swiss corporate tax legislation.

Webcast recording 2013

Insight on the most important points and relevant implications of the final report by the FDF.

 

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International Corporate Tax

Corporate taxation requires a sustainable methodology. A global approach provides answers to many questions.