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Switzerland Confirms CIT Reforms

by Ulrika Lomas,, Brussels

31 May 2019

The Swiss Federal Council has confirmed that the Federal Act on Tax Reform and AHV Financing (TRAF) will apply from next year.

On May 19, nearly two-thirds of Swiss voters approved the TRAF in a referendum. On May 22, the Federal Council said that the TRAF regulations are expected to enter into force on January 1, 2020.

The TRAF will abolish special arrangements for cantonal status companies and introduce a mandatory patent box regime for all cantons, with additional optional deductions for research and development expenditure. It also sets a minimum level of taxation for dividends from qualified participants, introduces additional depreciation measures for companies relocating to Switzerland, and extends the application of the flat-rate tax credit.

The Council also confirmed that the federal practices for principal companies and Swiss finance branches will be abolished with effect from January 1, 2020. It explained that as these are practical regulations, no changes to the law are necessary to abolish them. Since January 1, 2019, no new companies have been admitted to these two federal practices.

Under the current rules, if a principal company is located in Switzerland, some of the net profit is exempt from taxation in the country. The calculation of a usage fee for the capital made available to Swiss finance branches reduces their taxable net profit.

TAGS: tax | law | corporation tax | transfer pricing | Switzerland | dividends | regulation | research and development | BEPS

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