Switzerland: BEPS outlook following voters' rejection of corporate tax reform

BEPS outlook; rejection of corporate tax reform

Swiss citizens this month voted “no” on the proposed “Corporate Tax Reform III” and now, one question being asked is: What does this mean for Switzerland’s position on and with regards to implementation of BEPS (base erosion and profit shifting)?

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Outlook for BEPS

Generally speaking, there is very little or no direct impact of the vote on BEPS, and in particular BEPS Action 13 and the country-by-country (CbC) reporting is not affected at all. For purposes of implementing CbC reporting, Switzerland’s government must proceed with and see that a new law on the international automatic exchange of CbC reports of multinationals (ALBA-Gesetz) becomes effective, ideally in 2017. For that, the parliamentary debates must be completed, and the referenda period must elapse so that the law does not become subject to a referendum vote.

While the vote on the corporate tax reform means that business once again must deal with some uncertainty, there is no uncertainty regarding the implementation of the BEPS actions in Switzerland. The implementation of the minimum standards as set out in the “inclusive framework for the implementation of the BEPS package” as signed up by Switzerland and covering harmful tax practices (Action 5), tax treaty abuse (Action 6), country-by-country reporting (Action 13) as well as improvements in cross-border tax dispute resolution (Action 14) is generally still on track.

  • BEPS Action 5: The implementation and application of Action 5 on harmful tax practices includes the repeal of certain current Swiss tax regimes—e.g., the cantonal holding privilege, the mixed company regime—as well as the implementation of new but acceptable BEPS “proof” practices like a patent box (as foreseen by the proposed Corporate Tax Reform III (CTR III). While CTR III was rejected by voters on 12 February 2017, the repeal of perceived “harmful tax regimes” will likely become reality. Whether these applications of BEPS Action 5 will happen within the timeframe communicated in preparation of CTR III or with a certain delay is again subject to clarification as to the how and when a new draft CTR III will be ready.
  • BEPS Action 6: The implementation of measures, including new or further measures against tax treaty abuse as dealt with by Action 6, is subject to the application of corresponding new guidance with the negotiation of income tax treaties as well as the review of any application of a “principle purposes test” for particular cases. 
  • BEPS Action 14: The implementation of Action 14 in Switzerland has to follow the timing and pulse of the OECD.

 

Read a February 2017 blog item posted by the KPMG member firm in Switzerland

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