The Swiss Parliament adopted on September 28, 2018, a new corporate tax regime to be applicable as per January 1, 2020. This legislation will be most probably subject to a nationwide popular referendum in spring 2019. If the Swiss voters approve, Switzerland will hopefully end its tax squabbles with the European Union over the last years.
The Swiss Parliament largely agreed on the necessity and measures of a tax reform. The last differences regarding the municipal article and the capital contribution principle were resolved in the autumn session. As a result, the reform now includes the following cornerstones to be considered in any ongoing tax planning process of Swiss corporations.
- The cantons are financially supported by the Confederation so that they can lower their tax rates. The cantons are currently planning to reduce their income taxes to 12-18 percent.
- The internationally no longer accepted corporate tax privileges providing for non-taxation of foreign income will be abolished.
- Hidden reserves created during a tax privilege will be taxed separately when realised for a maximum of five years.
- If a company moves to Switzerland or if tax-exempt companies are converted into taxable companies, it can disclose its hidden reserves in the tax balance sheet and write them off over 10 years.
- A patent box will be introduced at the cantonal level, which allows reduced taxation of income from patents and similar IP-rights up to 90 percent.
- There is a so-called super deduction of 150 percent for the expenditures regarding for research and development performed in Switzerland.
- High tax cantons may allow the deduction of a constructive interest calculated on the equity. For the time being, the Canton of Zurich will be the main beneficiary benefit from this measure.
- The total relief provided by all of the above tax alleviations measures is limited to 70%.
- The cantons may provide for relief from capital tax on equity capital attributable to participations, patents and similar rights.
- Dividends from participations of at least 10 percent should be taxed at 70 percent on the federal level and at least 50 percent by the cantons.
- In the case of business restructurings, the limit falls. This means that anyone who transfers a shareholding to a company in which he holds at least 50% of the shares himself will have to pay tax on the sales profit.
- Listed companies may only pay out tax-free capital investment reserves if they distribute taxable dividends in the same amount. There is an exception for companies that moved in after February 2008. These companies can distribute tax-free reserves transferred from abroad without restriction.
- Swiss permanent establishments of foreign companies should be able to claim the flat-rate tax credit if they are properly taxed in Switzerland.
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.