The cantonal government of Zug has defined the cornerstones for
the implementation of Corporate Tax Reform III. The core component
is a standard corporate income tax rate of approximately 12
percent. The reform is expected to be adopted without any
significant financial losses for the canton, companies and private
individuals, thanks to targeted measures, for example by launching
a patent box or the promotion of research and development. This
ensures that Zug remains an attractive place of living and
business, both nationally and internationally.
The Corporate Tax Reform III (CTR III) is of major importance
for Switzerland and in particular for the internationally-oriented
business location of Zug. Its objective is to bring the Swiss
taxa-tion system in line with the international requirements and
includes the reversal of the tax benefits for certain
internationally operating enterprises. «The cantonal
government clearly supports the reform and is prepared to implement
it», explains Landammann and head of Department of Finance
Heinz Tännler. «We have defined the cornerstones to
ensure that the re-form, from today's perspective, is
implemented in the Canton of Zug without negative impacts on the
business location. This means without noteworthy financial losses
for the canton and municipalities and without passing on any extra
tax burdens to private tax payers.»
The core component of CTR III is a standard corporate income tax
rate of approximately 12 percent for all companies. A further part
of the package is the introduction of a patent box with a cantonal
tax relief of 90 percent. Moreover, research and development are
promoted with a cantonal tax deduction of 150 percent. Further
cornerstones include the implementation of a notional interest
deduction, whereby the taxation of qualifying dividends will be
increased from currently 50 percent to 60 percent as required by
federal law. The Canton of Zug aims at a maximum relief of 80
percent of net profit in total and to make adjustments with regard
to annual capital tax. «This package ensures that the Canton
of Zug remains attractive and competitive», states Landammann
Tännler, convinced of the measures.
Local companies benefit
The adjustments will lead to a major reform in corporate
taxation. Some of the holding, domicile and mixed companies, which
currently benefit from a privileged tax treatment, will be required
to accept a moderately higher tax burden. In contrast, the
corporate income tax rate for all other Zug-domiciled companies
will be reduced from currently 14.6 percent to approximately 12
No additional tax burden for private tax payers
Zug's corporate tax law reform shall be neutral. This means
that the various additional revenues and revenue shortfalls,
including indirect national financial equalization scheme (NFA)
impacts, offset each other almost entirely. «The cantonal
government places utmost importance on the fact that CTR III does
not lead to a shift of corporate tax burdens to private
individuals», emphasizes Minister of Finance
Final proposal in spring 2017
To date the decision by the cantonal government is based on
estimates and projections. Furthermore, the Swiss people are
expected to vote on CTR III in February 2017. Only thereafter, the
federal government will publish important implementing ordinances
on the patent box and on the promotion of research and development.
For this reason, the cantonal government will consult again on the
cornerstones at the beginning of 2017. The final proposal is
expected to be submitted for consultation in April 2017. At this
time, the financial outlook and project results of «Finanzen
2019» will be easier to estimate. Consultation by the
cantonal parliament is planned for 2018 and the new law will come
into effect at the beginning of 2019.
Cantonal government recommends voting for CTR III
The cantonal government is fully convinced by CTR III and
recommends accepting the proposal and rejecting any corresponding
referendum. It is convinced that CTR III, as proposed by the
federal government and parliament, is both necessary and
appropriate to maintain the legal security as well as the economic
success of Switzerland and the Canton of Zug.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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