Canton of Vaud to offer companies a competitive tax framework

Media Release: Vaud Tax Monitor

Set to enter into force in 2019, Vaud’s third corporate tax reform (CTR III-VD) offers a package that will place the canton among the most attractive in the country. Given its heavy reliance on special-status companies, a successful reform at federal level is urgently needed. Vaud is still one of the Swiss cantons with the highest tax rates for individuals.

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The ‘Vaud Tax Monitor’ is a joint publication by KPMG and the Chamber of Commerce and Industry of Vaud (Chambre vaudoise du commerce et de l’industrie; CVCI) which examines the tax attractiveness of the canton of Vaud for both legal entities and individuals. Corporate taxes in this canton are currently among the highest in Switzerland. On 20 March this year, however, Vaud’s electorate overwhelmingly voted in favor of its CTR III, substantially cutting the canton’s profit tax rate. By reducing this to 13.79% from 2019, the canton of Vaud will have the opportunity to provide favorable long-term conditions that will benefit its future development and maintain its attractiveness. A further reduction of tax rates for individuals to consolidate this position would be welcome.


The key findings

Corporate taxes: gradual reduction of corporate tax rate

  • The tax rate on profit for companies located in the canton of Vaud is currently the third highest in the nation. The decision taken on 20 March 2016 to introduce a single rate of 13.79% on 1 January 2019 will be especially beneficial for SMEs.
  • Bucking the national trend, the canton of Vaud only began reducing its profit tax rate gradually – first in 2013 and then in 2016. The vote in favor of the 13.79% rate on 20 March 2016 marks a significant turning point as it makes Vaud the first Swiss canton to enshrine its CTR III strategy in its legislation.

Companies with privileged tax status highly significant

  • Tax revenue from individuals represents 74% of the overall tax revenue whilst the corporate contribution makes up just 13%.
  • The canton of Geneva, on the other hand, is reliant on tax revenue from legal entities given that the corporate tax revenue accounts for some 21.5% of the canton’s overall tax revenue.
  • Tax revenue from companies with privileged tax status varies considerably from one canton to another and is extremely high in the cantons of Vaud, Geneva, Zug and Basel-Stadt.

In terms of the implementation of CTR III at cantonal level, it is Vaud that has made the most progress in the legislative process. In March of this year, for instance, the canton’s electorate took a major step forward and overwhelmingly approved the draft CTR III with an 87.12% majority. With the introduction of a single tax rate of 13.79% that would apply to all companies from 2019, Vaud has set the benchmark for many cantons.

Mixed companies provided around 25,000 jobs in 2011, both directly and indirectly, or around 8.7% of all jobs available in the canton of Vaud. Accordingly, multinational corporations are extremely important for the canton in terms of their impact on the economy. They lay the foundation that safeguards both the development and the very existence of a large number of Vaud’s SMEs. All in all, the added value these companies create to the benefit of Vaud’s economy comes to around CHF 5 billion.

While enterprises with privileged tax status currently account for just 7% of all companies, they contribute around half of direct federal tax revenue. Accordingly, the success of the corporate tax reform is essential. CTR III is a vital reform to ensure Vaud’s economic sustainability and employment whilst maintaining its competitiveness at international level.

Individual tax rates in French-speaking Switzerland can only get better

  • Compared to the canton of Vaud, peak income tax rates are only higher in the cantons of Geneva and Basel. In the cantons of French-speaking Switzerland, individuals in the middle to upper class generally pay some of the highest income taxes in the country.
  • The burden on high-income taxpayers can thus practically double between the canton of Vaud and the cantons with the lowest tax rates. The same applies within the canton of Vaud itself in respect of municipal taxes.
  • Of the taxpayers in Vaud with an income of less than CHF 60,000, 61.5% account for 16.4% of the canton’s income tax revenue, while 3.5% of taxpayers with an income in excess of CHF 200,000 make up 31.9% of the tax base.
  • The canton of Vaud has one of Switzerland’s highest maximum rates of wealth tax.
  • Of the taxpayers with less than CHF 500,000 in assets, 89.4% account for a total of 13.8% of the canton’s wealth tax revenue, while 4.7% of taxpayers with assets in excess of CHF 1,000,000 make up 71.1% of this revenue.

The ‘Vaud Tax Monitor’

The ‘Vaud Tax Monitor’ is a systematic, intercantonal comparison of the tax competitiveness of the canton of Vaud, particularly with regard to neighboring cantons. It analyzes the canton’s attractiveness in terms of corporate taxation and revenue structure. The ‘Vaud Tax Monitor’ is a joint publication of KPMG and the Chamber of Commerce and Industry of Vaud (Chambre vaudoise du commerce et de l’industrie; (CVCI).

Further information

Swiss Tax Landscape

Swiss Tax Landscape

Current trends in the Swiss tax landscape from an international perspective.

© 2016 KPMG Holding AG is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.

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