Nexia Ebner Stolz

Swiss Voters Reject Corporate Tax Reform

On February 12, 2017, Switzerland rejected Corporate Tax Reform III with a majority of nearly 60% of voters. One of the cornerstones of this reform is the abolition of tax privileges, including those for holding companies (special tax status), which will probably be highly relevant for foreign investors as well.

The reform also inclu­des tax breaks. Income from pat­ents and rights will be lar­gely sub­ject to tax breaks at can­to­nal level using a patent box regime. In accor­dance with the regu­la­ti­ons of the indi­vi­dual can­tons, rese­arch and deve­lop­ment expen­ses in Swit­zer­land will be deduc­ti­ble in the amo­unt of up to 150% of the actual costs incur­red. The notio­nal inte­rest deduc­tion gran­ted on exces­sive share­hol­ders‘ equity at federal level will also be pos­si­ble at can­to­nal level. Howe­ver, upwards of a cer­tain mini­mum share­hol­ding, at least 60% of divi­dends will be taxed.

Swiss Voters Reject Corporate Tax Reform© Thinkstock

Mathias Josi from our Swiss Nexia part­ner T + R AG ans­wers all of our ques­ti­ons on what will hap­pen next.

Mr. Josi, were you sur­pri­sed that Swiss voters rejec­ted the cor­po­rate tax reform?

No, the wide­s­p­read uncer­tainty regar­ding the spe­ci­fic effects indi­ca­ted some time before the refe­ren­dum that the reform would pro­bably be rejec­ted.

So what will hap­pen next? Is cor­po­rate tax reform in Swit­zer­land now off the table?

Poli­cy­ma­kers agree that a new draft must be drawn up as quickly as pos­si­ble. The spe­cial taxa­tion regime for what are known as “spe­cial sta­tus com­pa­nies” will be abo­lis­hed. Which other ele­ments will be inte­g­ra­ted into a new draft remains a topic of politi­cal dis­cus­sion. The Federal Finance Depart­ment is expe­di­ting work on a new ver­sion of the reform under the title Steu­er­vor­lage 17. The basic para­me­ters of the new bill are expec­ted to be pre­sen­ted to the Federal Coun­cil in June 2017 for deci­sion. Howe­ver, an amen­ded reform is unli­kely to come into force before 2020.

What effects will the pro­po­sed legis­la­tion have for for­eign inve­s­tors, say for­eign com­pa­nies with Swiss sub­si­dia­ries?

None in the short term, but at the moment there is natu­rally a cer­tain deg­ree of legal uncer­tainty, which is to be redres­sed as swiftly as pos­si­ble through Steu­er­vor­lage 17.

Matthias Josi, T + R AG, Fürsprecher, Dipl. Steuerexperte, Vizedirektor, T+R AG, Schweiz © Matthias Josi, T + R AG

Will this tem­porary halt to the reform plans hurt Swit­zer­land as a busi­ness loca­tion?

It cer­tainly won’t help. It is now up to the politi­cal deci­sion-makers and ulti­ma­tely again up to voters, perhaps, to off­set any poten­tial adverse effect as quickly as pos­si­ble.

Are there other plan­ned chan­ges in tax law that are rele­vant for for­eign com­pa­nies which are active in Swit­zer­land?

No other chan­ges in tax law are plan­ned at pre­sent. The focus is on Steu­er­vor­lage 17, which – as men­tio­ned above – will eli­mi­nate the spe­cial tax sta­tus that is important for many for­eign com­pa­nies. It will be inte­res­ting to see whe­ther indi­vi­dual can­tons make per­cep­ti­ble cuts in pro­fit tax rates of their own accord in the meantime. The attrac­tive­ness of indi­vi­dual loca­ti­ons from a tax per­spec­tive is expec­ted to remain unchan­ged with effec­tive mini­mum tax rates of 12% or 13%.

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