Switzerland: Switzerland considering notional interest deduction on equity
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Switzerland: Switzerland considering notional interest deduction on equity

savoia.jpg

zulauf.jpg

Reto Savoia


René Zulauf

As part of the Swiss Corporate Tax Reform III, which will lead to a replacement of the various special Swiss cantonal tax regimes by a whole host of measures in the 2018 – 2020 timeframe, Switzerland is considering introducing, among other measures, a notional interest deduction on equity. Notional interest deduction on equity is an internationally accepted concept, which has been introduced in Belgium and Luxembourg, among other jurisdictions. The concept is based on the notion that the tax code should not influence the decision on whether to finance a company through debt or equity.

There are several ways to design such a Swiss notional interest deduction for tax purposes that would be granted in addition to the tax deductibility of arm's length interest on debt. While the notional interest deduction will be available to all Swiss companies, its intent is primarily to benefit financing activities.

To this end, and to limit the broad loss of tax revenues that would be brought about by a notional interest deduction on the entire equity of a Swiss company, the notional interest deduction will likely only be granted on 'surplus equity'. Borrowing from the concept of Swiss thin capitalisation limitations, which require a certain equity underpinning per different class of assets, the required surplus equity could be defined in such a way as to mainly benefit financing activities.

While the introduction of a notional interest deduction is controversial in Switzerland mainly because of the feared loss in tax revenues if it were designed too generously, it is expected that it will be introduced in some form. It is the only practical measure to keep existing considerable financing activities of multinationals in Switzerland and to attract additional financing activity.

Reto Savoia (rsavoia@deloitte.ch)

Tel: +41 58 279 6357
René Zulauf (rzulauf@deloitte.ch)

Tel: +41 58 279 6359

Deloitte

Website: www.deloitte.ch

more across site & bottom lb ros

More from across our site

Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
HSBC has settled a claim originally worth £240m relating to a failed film tax relief scheme without admitting liability or wrongdoing
Gift this article