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Switzerland Finalizes Corporate Tax Reforms

by Ulrika Lomas,, Brussels

02 April 2015

Switzerland's Federal Council has announced plans for a package of federal and cantonal corporate tax reforms, with the aim of bolstering the country's international standing and competitiveness.

The announcement follows a consultation process, during which a majority of the Government's proposals met with broad approval.

The Council 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.

A royalty box will be introduced at cantonal level. The cantons will be given the option of applying a higher deduction for research and development (R&D) expenditure and will also be able to introduce targeted capital tax deductions.

The Federal Council will scrap plans for the introduction of an interest-adjusted profit tax, after the measure was opposed by a majority of the cantons. It will also no longer pursue changes to the participation deduction and the offsetting of losses, and will not propose the taxation of capital gains.

The Council will, however, go ahead with the abolition of the issue tax on equity capital, and will implement comprehensive rules for the disclosure of hidden reserves. The relief associated with the partial taxation of dividends will be harmonized for the Confederation and the cantons and limited to 30 percent. The minimum stake of 10 percent will be maintained.

The cantons will be able to supplement the new rules if necessary. Any costs incurred should be equally borne by the Confederation and the cantons. Meanwhile, the cantons's share of direct federal tax will be increased from 17 percent to 20.5 percent.

The Federal Department of Finance will prepare a dispatch on the new rules by June 2015. Once this has been adopted by the Council, legislation will be presented to Parliament. The Federal Council estimates that the impact of the reforms on the federal finances will be approximately CHF1.1bn (USD1.14bn) a year.

TAGS: compliance | tax | tax compliance | tax incentives | interest | corporation tax | legislation | tax planning | tax rates | Switzerland | dividends | revenue statistics | tax reform | standards | research and development

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