Switzerland: Corporate tax reform legislation advances

Switzerland: Corporate tax reform legislation advances

Switzerland’s National Council—following action of the Council of States—today adopted a final decision concerning a package of corporate tax reform referred to as “CTR III” or “corporate tax reform III.”

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The Swiss tax reform proposals take into consideration the OECD’s action plan to address base erosion and profit shifting (BEPS) and requests by the European Union. Therefore, CTR III would provide a corporate tax system that generally is in line with the current international standards. The tax reform provisions in Switzerland are expected to be considered and passed by the federal parliament, with a final formal vote expected 17 June 2016. 

Tax policy measures accepted

The tax measures, passed by the National Council and the Council of State, include:

  • Repeal of cantonal tax status for holding, domicile, and mixed companies as well as of the principal company taxation and the finance branch regime
  • A patent box regime, at the cantonal level
  • R&D super deduction, at the cantonal level 
  • Notional interest deduction 
  • “Step up” for tax purposes as a transitional measure and a step-up mechanism to reveal hidden reserves
  • Reduced capital tax basis 

Measures rejected

Both the National Council and Council of States voted against the following proposals:

  • A tonnage tax regime for shipping companies
  • Repeal of the stamp duty on equity 
  • Capital gains tax for privately held securities
  • Full taxation of dividends

Also, the Swiss cantons are generally free to reduce their ordinary tax rates, taking into account the anticipated effect of the CTR III on their budget. Some cantons have already announced effective income tax rates would be as low as 12% to 13%, whereas the canton of Vaud has decided on an effective income tax rate of 13.8%.

KPMG observation

With these new tax measures and considering the reduced cantonal tax rates that CTR III represents, it appears that Switzerland would retain its position as an attractive business location. It is expected that the new measures would be effective beginning 2019. If a referendum (public vote) would be required, the effective date of these tax reform provisions could be delayed by one to two years. Even if the privileged cantonal tax regimes would not be repealed before 2019, companies currently benefiting from these tax regimes could be affected by implementation of new international standards (i.e., BEPS).


Read a June 2016 blog item prepared by the KPMG member firm in Switzerland: Corporate Tax Reform III: Switzerland’s tax system remains attractive

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