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Swiss Cantons Agree Corporate Tax Improvements

by Ulrika Lomas, Tax-News.com, Brussels

02 May 2014


The Swiss cantons have expressed their support for plans to reform and improve the nation's corporate tax system.

The corporate tax reform is designed to develop the Swiss tax system further, and to strengthen its competitiveness, while at the same time taking international developments into account. The Federal Council said it wants Switzerland to remain attractive by providing legal certainty, which it said can only be achieved through an internationally accepted tax system.

The Swiss Federal Department of Finance (FDF) explained that: "Switzerland's attractive tax environment for companies has made a significant contribution to the country's prosperity in recent years. Companies based here create jobs, make investments, and provide an important source of tax revenue. Companies with cantonal tax status have accounted for half of the Confederation's profit tax receipts in recent years."

"International developments, particularly [from] the Organisation for Economic Co-operation and Development (OECD), have led to a situation whereby certain provisions of existing Swiss legislation are no longer compatible with international standards. As a result of this diminishing acceptance, companies are confronted with reduced legal and planning certainty. The aim of the latest corporate tax reform is to consolidate international acceptance. This will provide clarity for companies with respect to the key legal parameters," it said.

"At the same time, the reform includes a substantial package of further measures designed to improve the system of corporate tax legislation. The work undertaken by a joint federal and cantonal project organization constitutes the basis for the key aspects of the reform. In December 2013, the project organization prepared a report that set out and evaluated various measures. The proposed measures have generally been welcomed by the cantons."

As part of the ongoing review of all tax regimes of OECD member states, several Swiss tax regimes, including those criticized by the EU, were classified as problematic, primarily due to the different taxation of domestic and foreign company profits. The review also includes the preferential taxation of royalties, or "IP boxes" (also known as patent or royalty boxes). Switzerland is currently in discussions with the EU. It hopes to reach a balanced understanding on business taxation issues within the next few months.

The FDF will now prepare a corporate tax reform consultation draft after feedback from cantons. The consultation period will end in September 2014.

TAGS: environment | Finance | tax | investment | business | mining | royalties | Organisation for Economic Co-operation and Development (OECD) | corporation tax | legislation | Switzerland | tax breaks | tax reform | standards

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