Switzerland: Swiss voters reject Corporate Tax Reform III in its proposed form

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

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

Switzerland: Swiss voters reject Corporate Tax Reform III in its proposed form

kistler.jpg
zulauf.jpg

Jacques Kistler

Rene Zulauf

In a referendum held on February 12 2017, the Swiss electorate voted to reject the Corporate Tax Reform III (CTR III), which had been approved by parliament.

The main objectives of this comprehensive corporate tax reform, which was scheduled to become effective on January 1 2019, were to align domestic tax law with international standards and enhance Switzerland's attractiveness as a location for multinational companies.

The reform would have phased out all special corporate tax regimes, such as the mixed, domiciliary, holding and principal company regimes, as well as the finance branch regime.

The CTR III contained a number of measures to compensate for the elimination of the beneficial tax regimes, such as the following:

  • A reduction of the general cantonal/communal tax rates at the discretion of the individual cantons;

  • The introduction of a mandatory cantonal-level patent box regime applicable to all patented intellectual property (IP) for which the research and development (R&D) spend occurred in Switzerland, based on the OECD modified nexus approach;

  • The introduction of cantonal R&D incentives in the form of deductions of up to 150% of qualifying R&D expenditure at the discretion of the individual cantons;

  • A step-up of asset basis (including for self-created goodwill) for direct federal and cantonal/communal tax purposes upon the migration of a company or additional activities and functions into Switzerland;

  • The tax-privileged release of "hidden reserves" for cantonal/communal tax purposes for companies transitioning out of tax-privileged cantonal tax regimes (such as mixed or holding companies) into ordinary taxation;

  • The introduction of a notional interest deduction (NID) regime at the federal level and at the discretion of the individual cantons (however, a canton would have been required to introduce a revenue-raising measure to partially compensate for introducing an NID); and

  • A reduction of the cantonal/communal annual net wealth tax in relation to the holding of participations and of patented IP, at the discretion of the individual cantons.

Since only a few aspects of CTR III were disputed and as pressure from the EU for abolishing the tax-privileged regimes continues, the Federal Council is expected to quickly reintroduce revised legislation, which likely would include the elements of the previous measures, but without the controversial items, most notably the NID. In addition, as a revenue-raising measure, the revised version of the legislation may include a provision that dividend income received by individuals from qualifying participations of at least 10%, under the partial taxation regime for dividends would have to be increased to 70% at both a cantonal and a federal level.

Although it still may be possible for revised legislation to meet the original January 1 2019 introduction timetable at the federal level, because the cantons need adequate time to introduce the law into cantonal legislation, the introduction of the law may be postponed by one or two years, i.e. to January 1 2020, or more likely to January 1 2021.

Jacques Kistler (jkistler@deloitte.ch) and Rene Zulauf (rzulauf@deloitte.ch)

Deloitte

Tel: +41 58 279 8164 and +41 58 279 6359

Website: www.deloitte.ch

more across site & shared bottom lb ros

More from across our site

Australian law firm Webb Henderson’s report said PwC had met 46 of 47 targets; in other news, the OECD has issued new transfer pricing country profiles
The arrival of a seven-strong team from Baker McKenzie will boost WTS Germany’s transfer pricing capabilities and help it become ‘a European champion’, the firm’s CEO said
Germany has forgotten to think about digital reporting requirements, a WTS partner claimed at ITR’s Indirect Tax Forum 2025
E-invoicing is currently characterised by dynamism, with fragmentation acting as a key catalyst for increasing interoperability, says Aida Cavalera of the International Observatory on eInvoicing
Pillar two and the US tax system ‘could work in harmony’, Scott Levine tells ITR in an exclusive interview to mark his arrival at Baker McKenzie
Peter White, who has a tax debt of A$2 million, has been banned for five years from seeking registration with Australia’s Tax Practitioners Board (TPB)
Wopke Hoekstra’s comments followed US measures aimed against ‘unfair foreign taxes’; in other news, Grant Thornton and Holland & Knight made key tax partner hires
An Administrative Review Tribunal ruling last month in Australia v Alcoa represents a 'concerning trend' for the tax authority, one expert tells ITR
A recent decision underlines that Indian courts are more willing to look beyond just legal compliance and examine whether foreign investment structures have real business substance
Following his Liberal Party’s election victory, one source expects Mark Carney to follow the international consensus on pillar two, as experts assess the new administration
Gift this article