Switzerland tax proposal 17 update | KPMG | BE

Switzerland: Update concerning “Tax Proposal 17”

Tax Proposal 17 in Switzerland

The Swiss Federal Council, after confirming the schedule for “Tax Proposal 17,” has decided not to make significant changes to the tax proposals from the version provided for consultation, and the final legislative proposal is expected at the end of March 2018.

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It is anticipated that the final version of the legislation will be quite similar to the draft submitted for consultation. One change is that Tax Proposal 17 would provide for an increase in the cantonal share of the direct federal tax income, currently at 17%, to 21.2% (instead of 20.5%) as requested by the cantons. 

Among the main elements of the tax reform proposal are measures that would:

  • Repeal the status companies at the cantonal level as well as certain tax practices at federal level including transitional measures
  • Introduce a mandatory patent box regime at the cantonal level
  • Introduce an optional R&D “super deduction” at the cantonal level
  • Impose higher taxation (of 70% / at least 70%) on dividends for qualifying shareholdings of individuals
  • Increase the child and education allowance by CHF 30 per month
  • Introduce an overall tax relief limitation to 70% of all tax measures at cantonal level
  • Provide an option to reduce the calculation of capital taxes on equity relating to participations as well as patents and similar rights
  • Allow for the disclosure of hidden reserves including goodwill (step-up) in case of relocation to Switzerland

There would be (for now) no notional interest deduction on shareholders’ equity.

What's next?

Further details on the tax measures will be provided within a dispatch due for publication at the end of March 2018. Parliament would make its final decision in the fall 2018. If no referendum is called, the first measures (elements of a more technical nature) could be effective at the start of 2019 and the main part of the reform by 2020. This timetable is ambitious but shows that the reform is seen as highly urgent due to ongoing and recent international pressure and changes in the international tax landscape.

 

Read a February 2018 report prepared by the KPMG member firm in Switzerland

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