 |
 |
Jackie
Hess |
René
Zulauf |
On September 6 2017, the Swiss Federal Council issued the
draft legislation for the Swiss Tax Reform Proposal 17 (STR 17,
formerly known as Swiss Corporate Tax Reform III). The proposal
that largely follows the recommendations of the steering
committee represents a well-balanced and internationally
competitive solution that would ensure that Switzerland stays
an attractive location for multinationals and domestic
companies alike, while at the same time providing an
internationally aligned tax system that is in conformity with
international standards, such as OECD BEPS and others.
The main proposed changes compared to CTR III include:
- The notional interest deduction (NID) on
federal and cantonal level is no longer part of the
package;
- The partial taxation for individual
shareholders holding at least 10% would be increased to 70%
from 60% on a federal level and mandatorily at least to 70%
for all cantons; and
- The combined tax relief for the patent
box, the R&D super deduction and the amortisation from
the step-up of hidden reserves due to a status change prior
to STR 17 shall be limited to a maximum of 70% on a cantonal
and communal level.
The main proposed elements of STR 17 include:
- The sunset of all special corporate tax
regimes, such as the mixed, domiciliary, holding and
principal company regimes, as well as the Swiss finance
branch regime;
- 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,
with the intent to mitigate such effects by providing
companies with a lower tax rate during a transition period of
five years;
- A reduction of the general
cantonal/communal tax rates at the discretion of the
individual cantons. Various cantons can be expected to be in
the 12%–14% ETR bracket (effective combined
federal/cantonal/communal tax rates);
- 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; and
- 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.
Expected timeline
The proposed legislation will now enter the consultation
procedure, which lasts for three months and under which the
various stakeholders can weigh in on the legislation, so that
the final version can be introduced into and voted on by the
Swiss Parliament in its spring session of 2018. It seems
currently unlikely that there would be a referendum (public
vote) on the legislation, so that STR 17 could enter into force
as soon as January 1 2020, but no later than January 1
2021.
Jackie Hess (jahess@deloitte.ch) and
René Zulauf (rzulauf@deloitte.ch)
Deloitte
Tel: +41 58 279 6312 and +41 58 279 6359
Website: www.deloitte.ch