Switzerland Reviews Tax Deduction

by Ulrika Lomas, Tax-News.com, Brussels

21 April 2010

Switzerland’s Federal Council has initiated a consultation process designed to modify existing federal and cantonal legislation pertaining to the tax deductibility of professional training and development costs.

Within the framework of the new federal law on the taxation of costs for training and development, the Federal Council has proposed that costs associated with voluntary professional retraining, as well as costs linked to professional promotion, should become tax-deductible from federal and cantonal income tax.

Currently, training costs are only tax-deductible if they are either linked to the individual’s current profession, or if they are vital for retraining or professional reintegration. Costs associated with initial training or training with no direct link to the current profession will remain non-tax deductible.

The Federal Council has proposed that a ceiling of CHF4,000 (EUR2,786) is imposed on the total amount of training costs that can be deducted from direct federal tax. According to the Swiss Federal Administration, the cantons will be at liberty to determine their own ceiling.

The loss in fiscal revenue that will result from the proposed changes is estimated at around CHF5m (EUR3.49m) per year as regards direct federal tax. The loss in income for Swiss cantons and towns can not currently be calculated, however, as it has not yet been decided whether or not the new deductions will be integrated into the law on tax harmonization.

On September 23, 2009, the Swiss Committee for Economic Affairs and Taxation of the Council of States submitted a proposal requesting that the Federal Council proceed with a modification of the law on the taxation of costs for training and development. The new law aims to eliminate existing differences in the interpretation of training costs between the cantons.

The consultation process is due to last until August 7, 2010.

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