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Switzerland: New Swiss Principal Company and Swiss Finance Branch rulings to be phased out from January 1 2019

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Switzerland is phasing out principal company and finance branch rulings as part of broader tax reform.

Switzerland is phasing out principal company and finance branch rulings as part of broader tax reform

From January 1 2019, no new rulings will be granted for Swiss principal company regimes that are governed by Circular Letter No. 8 (dated December 18 2001) and for Swiss finance branch regimes. Existing rulings for these regimes are scheduled to be sunset from January 1 2020 as part of broader Swiss tax reform.

The Sunsetting of Special Tax Regimes

The Swiss Federal Tax Administration (SFTA) on November 15 2018 announced that from January 1 2019, no new rulings for the Swiss principal company regime (governed under Circular Letter No. 8, dated December 18 2001) and for the Swiss finance branch regime, will be granted.

Existing rulings for these regimes are scheduled to be sunset from January 1 2020 as part of the Swiss Tax Reform and AHV Financing bill (TRAF, formerly Swiss Tax Reform 17), which was approved by the Swiss Federal Parliament in September 2018.

Under TRAF, all special tax regimes are scheduled to sunset January 1 2020 and be replaced with measures that are both internationally accepted and ensure Switzerland will remain attractive for multinational companies. However, the termination of the Swiss principal and the Swiss finance branch regimes - which are based on federal regulations, rather than tax law - do not require a legislative amendment. This is opposed to the abolishment of other special tax regimes, such as the holding and mixed company regimes.

Transitional rules

The statement by the SFTA does not include any comments making reference to the transitional rules for the Swiss principal company or Swiss finance branch regimes. The practice of a potential increase in the migration of principal business to Switzerland - upon implementation of TRAF - will be communicated once finally determined. However, we would expect that the determination would entail similar transitional rules to the mixed company regime.

Next steps

In line with Swiss legislative procedures, the final bill of TRAF is subject to a potential referendum (public vote). In order for such a referendum to be called, at least 50,000 voter signatures must be collected before the referendum deadline on January 19 2019. If a referendum is eventually called, a popular vote will be scheduled on May 19 2019. In case no referendum is called - or TRAF is approved by the popular vote in May - the Swiss Federal Council will enact all measures of TRAF, such as the sunset of all special tax regimes, as per January 1 2020.

This article was written by Jacques Kistler ( and Rene Zulauf ( of Deloitte Switzerland.

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