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Switzerland Pushing Ahead With Corporate Tax Reform

by Ulrika Lomas,, Brussels

02 June 2017

The steering body tasked with drawing up a new package of Swiss corporate tax reforms has published its recommendations.

The steering body is comprised of members from the Confederation and the cantons. It was set up following the Government's defeat in February's referendum on the third series of corporate tax reforms (CTR III). It met five times between March and May, and hearings were also held with political parties and business and employer associations.

The Government has three objectives for the new reform package (labelled TP 17): boosting Switzerland's appeal as a business location, securing international acceptance of Switzerland's regime, and ensuring the "productivity" of tax revenue.

The steering committee has recommended that the Federal Council:

  • Abolish the special tax arrangements for cantonal status companies;
  • Introduce a mandatory patent box at cantonal level, in line with the OECD standard;
  • Limit the additional deduction for research and development (R&D) costs to 50 percent of the actual costs, with deductions to focus primarily on personnel expenses;
  • Limit the tax relief on profits arising from the patent box and the R&D deduction to 70 percent;
  • Increase the tax rate for dividends, and set the partial taxation of dividends from qualified participations (i.e. with a minimum stake of 10 percent) at 70 percent at the federal level and at at least 70 percent at cantonal and communal level;
  • Increase the cantons' share of direct federal tax from 17 percent to 21.2 percent, taking the cities and communes into account; and
  • Increase the minimum amount for child and education allowances by CHF30 (USD30.91).

The Federal Council is expected to make a decision on the parameters of the TP17 package this month. The steering body wants to see TP17 swiftly adopted by the cantons, and expects the cantons to push ahead with their cantonal implementation projects in parallel to the development of the federal proposal.

Once the Council has agreed upon the shape TP17 will take, the Federal Department of Finance will prepare a consultation draft. The consultation will likely run to December 2017. It is hoped that the Council will adopt a dispatch on TP17 in the spring of 2018, which will then be considered by parliament.

TAGS: compliance | tax | business | tax compliance | tax incentives | corporation tax | tax thresholds | education | transfer pricing | tax rates | Switzerland | tax breaks | dividends | tax reform | research and development | BEPS

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