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:
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.
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.
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.
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%.
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.