The Swiss parliament has approved the entry into force of a major reform of its corporate tax system from 1 January 2020.
The starting point for the tax reform is the abolition of the arrangements for regional ‘status companies’ which are no longer accepted internationally. This is balanced by the introduction of new tax-related special arrangements to promote research and development, with a patent box allowing a portion of the profits from inventions to be taxed at a reduced rate at regional level in the future. The regions will also be able to make provision for an additional deduction of no more than 50% for R&D expenditure.
Those regions with an effective profit tax burden of at least 18.03% can introduce a deduction for self-financing. These special arrangements will be accompanied by a relief restriction, which includes a requirement for the regions to ensure that at least 30% of a company’s profits are taxed before the special measures are applied.
The following measures are designed to take account of the other purpose of the reforms, which is to improve financing of the Swiss system of social insurance and pension provision:
increased dividend taxation to 70% at federal level and at least 50% for the regions, although the regions can also make provision for a higher level of taxation;
adjustments to the capital contribution principle, restricting the tax-exempt distribution of capital contribution reserves; and
consideration of the cities and communes within the scope of the increase in the regions’ share of direct federal tax.
The Swiss parliament has approved the entry into force of a major reform of its corporate tax system from 1 January 2020.
The starting point for the tax reform is the abolition of the arrangements for regional ‘status companies’ which are no longer accepted internationally. This is balanced by the introduction of new tax-related special arrangements to promote research and development, with a patent box allowing a portion of the profits from inventions to be taxed at a reduced rate at regional level in the future. The regions will also be able to make provision for an additional deduction of no more than 50% for R&D expenditure.
Those regions with an effective profit tax burden of at least 18.03% can introduce a deduction for self-financing. These special arrangements will be accompanied by a relief restriction, which includes a requirement for the regions to ensure that at least 30% of a company’s profits are taxed before the special measures are applied.
The following measures are designed to take account of the other purpose of the reforms, which is to improve financing of the Swiss system of social insurance and pension provision:
increased dividend taxation to 70% at federal level and at least 50% for the regions, although the regions can also make provision for a higher level of taxation;
adjustments to the capital contribution principle, restricting the tax-exempt distribution of capital contribution reserves; and
consideration of the cities and communes within the scope of the increase in the regions’ share of direct federal tax.
