The Swiss National Council approves the proposed tax reform package! On 12 September 2018 the larger chamber of parliament adopted the proposal of the Economic Affairs and Taxation Committee of the Council of States on the Federal Act on Tax Reform and AHV Financing (formerly Tax Proposal 17), which is largely in line with the legislative bill adopted by the Council of States, the smaller chamber of parliament. Although slight differences regarding the capital contribution principle remain to be settled, the majority of member of the National Council sees the adopted text of the bill as a viable compromise.
After the rejection of the IIIrd Corporate Tax Reform package (CTR III) in a popular referendum held in February 2017, the Federal Council released a revised legislative bill for a tax reform on 21 March 2018, after a wide public consultation process was held. On 7 June 2018, the Council of States included, inter alia, a new subsidy of CHF 2 billion per annum for the Federal Social Security Scheme (AHV) as a form of socio-political compensation in its reform proposal to sweeten the proposal to a wider group of members of parliament (and their voters). Consequently, the former "Tax Proposal 17" is now known as the Federal Act on Tax Reform and AHV Financing (TRAF). The National Council has debated the TRAF on 12 September 2018 and backs the current proposal. Proposed differences to the bill proposed by the Council of States mainly concern the restrictions around using capital contributions in cases of dividend distributions and capital repayments.
Overall, the TRAF includes measures that are largely similar to the previously rejected version of the CTR III package but with some modifications designed to achieve support from the majority of Swiss voters. Like the previous package, the TRAF sets out to repeal the current privileged corporate tax regimes (holding, mixed and domiciliary, or auxiliary companies, the finance branch regime and the principal company regime).
It introduces some new measures designed to maintain Switzerland's competitiveness in the international tax arena (in particular, an OECD-conforming patent box regime and a super-deduction for R&D expenses). Although the highly controversial notional interest deduction (NID) was no longer included in Tax Proposal 17 as opposed to the rejected CTR III package, the National Council backs the proposal of the Council of States to implement a NID de facto only for the canton of Zurich.
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