The Swiss Federal Council is concerned that the corporate tax system of the country no longer meets international standards, which is bad for its status. In connection with this, another attempt was made to improve the system, therefore a new package of reforms TP17 was designed to make the jurisdiction more attractive and competitive without damaging the state budget.
We remind that in February of this year the government lost a referendum on the Corporate Tax Reform III package, which concept was in the cancellation of a number of tax benefits for the status companies in order to achieve compliance with changeful international requirements regarding unfair tax competition. After an unsuccessful attempt to revise the current system, a working group was convened to develop a new mechanism. The TP17 package was submitted to the Federal Council and approved by it in June.
The reformation of the system includes the following activities:
- Special preferences for the companies regarding their cantonal status, under which they pay a reduced income tax or are exempt from taxation at all, will be canceled.
- The cantons will have to enter the “patent box” regime, according to which the profit from patents and similar rights will be separated from other profits and will be charged by a lower tax, the exemption will be no more than 90%.
- Cantons will be given the opportunity to introduce additional tax deductions of up to 50% for research and development works.
- Taxation of dividends for individuals will be increased to 70% at the federal and cantonal levels.
- The share of cantons in direct federal tax revenues will be increased from 17% to 20.5%.
- Cantons will be allowed to reduce the tax rate on capital associated with the shares, patents and similar rights.
- Enterprises that will move their offices to Switzerland will be able to use additional depreciation during the first few years of their work.
- Swiss representative offices of foreign companies will have the right to a single tax credit which will allow them to avoid international double taxation.
According to the estimates of the Federal Council, the new package of the reforms will replenish the treasury by about 750 million Swiss francs (787.1 million US dollars), and will also allow about 1.8 million Swiss francs to be transferred to financially unstable cantons by 2024. The government also announced about the beginning of public consultations on TP17, which will end on December 6. The Federal Ministry of Finance plans to submit its proposals to the Parliament next spring. According to the preliminary forecasts, the new reforms may enter into force in 2020.
