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Swiss Government Makes Case For Corporate Tax Reform

by Ulrika Lomas,, Brussels

28 October 2016

The Swiss Federal Council has announced its support for the proposed changes to Switzerland's corporate tax framework, known as Corporate Tax Reform III (CTR III), ahead of a referendum on the issue due to take place early next year.

CTR III will abolish corporate tax arrangements that are no longer in keeping with international standards. These primarily relate to the cantonal tax statuses for holding, domiciliary, and mixed companies.

However, in order to maintain Switzerland's tax competitiveness, CTR III gives cantons the option of introducing a special patent box regime for intellectual property income, and applying a higher deduction for research and development expenditure. Many cantons also intend to reduce their corporate tax rates.

"Regarding the tax law measures which are being introduced with the CTR III, the focus is on promoting innovation," the Federal Department of Finance said on October 27. "The aim of the patent box is to tax patent revenue at a lower level. For research and development expenditure, the reform makes provision for a deduction to be made which goes beyond the actual costs. This will create an incentive for high value-added jobs which are associated with these activities to be retained in Switzerland or relocated here."

"Overall, the reform will lead to Switzerland remaining an attractive location for companies and to each canton being able to tailor its tax policy to its economic and financial situation," the Department said. "The reform will prevent the exodus of the existing status companies and thus potential tax losses of over CHF5bn (USD5bn) for the Confederation, the cantons, and the communes."

According to the FDF, the cantonal status companies currently employ around 150,000 people in Switzerland, and are responsible for almost half of all research expenditure. They also provide 20 percent of cantonal and communal tax receipts, and 50 percent of federal corporate tax revenues.

Switzerland's Parliament has also recommended that the third series of corporate tax reforms be adopted, with the National Council (lower house) having approved the proposal by 139 votes to 55, and the Council of States (upper house) by 29 votes to 10.

The public is set to vote on the corporate tax reform package on February 12, 2017.

TAGS: tax | patents | law | intellectual property | corporation tax | tax rates | Switzerland | tax reform | standards | research and development | Tax

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