Switzerland: New plans for tax reform

Switzerland: New plans for tax reform

After the Swiss electorate rejected the Corporate Tax Reform III proposals in the February 2017 referendum, the Swiss Federation announced that it would soon be presenting a new tax reform plan. Federal Councilor Ueli Maurer in early June 2017 described recommendations from a steering committee to the Federal Council regarding “Tax Proposal 17”—a reform largely based on the Swiss Corporate Tax Reform III. The Federal Council is expected to communicate its view on the new tax reform later this month.

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Tax reform proposals

While some of the elements of the CTR III are also found in the Tax Proposal 17, other elements are completely new—primarily seen as added in order to gain majority vote among parliamentarians and Swiss voters.  Among the items are the following.

  • Introduction of a patent box regime and a research and development (R&D) “super deduction”—both similar to the measures in the Corporate Tax Reform III. However, the taxed income definition would be narrowed under the patent box regime, and the additional “super deduction” for R&D (50%) would allow for more personnel costs.
  • Tax Proposal 17, unlike the CTR III initiative, would not foresee a notional interest deduction.
  • Tax Reform 17 would provide a proposed higher dividend taxation for individuals, so that 70% of the individuals’ dividend income would be taxable.
  • There would be an increase to the child and education allowance by CHF 30 per month.  
  • The overall tax relief of all tax measures would be limited to 70%, instead of 80%.
  • Status societies would be repealed.
  • The cantonal share of the direct federal tax income would increase from 17% to 21.2%, allowing the cantons to reduce their tax rates in a favorable manner.

What’s next?

The timeline for the legislative process is viewed as being ambitious. Later this month, the Federal Council is expected to inform the public about the parameters of the new tax reform. In September 2017, the consulting process is supposed to start so that the first results would be obtained by year-end. Successively, the Swiss Federal Council would share its dispatch to Parliament in spring of 2018. Parliament would then prepare and pass the new tax reform law, so that the first aspects of the new law would be effective by 2019, if no referendum is scheduled.

 

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

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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