All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Switzerland: Why the Swiss Corporate Tax Reform III needs to be aligned with BEPS

rudolf.jpg

zulauf.jpg

Hans Rudolf Habermache


René Zulauf

Switzerland's Corporate Tax Reform III (CTR III) not only intends to make the country even more competitive internationally as a location for multinationals, but signifies a commitment to introduce a tax system that is aligned with international standards and virtually "BEPS-proof". Under the proposed reform, likely by 2019 or 2020, all Swiss special corporate tax regimes will be replaced by other measures, such as a step up for tax purposes, a patent box, or notional interest deduction (NID) on equity. In addition, it is expected that most cantons will reduce their headline tax rates significantly. All of these measures combined should provide companies with low tax rates and planning security until 2029 or 2030, so for up to 15 years from now.

While CTR III should be attractive for most companies in the future, there are potential implications of the BEPS project in relation to CTR III that have to be considered now. For example, multinationals in Switzerland often operate under a principal business model and may be affected by the OECD move to attribute a higher share of profit to group entities operating under a limited function and risk profile (for example, toll manufacturing or commissionaire structures). Particularly, the recently published discussion draft on permanent establishment (PE) status avoidance may either require changes to the business model or the principal company may be challenged on the basis of having PEs in a number of countries.

While there are structuring options to mitigate the tax impact of such PEs, they may adversely affect the principal company tax status of a Swiss company, which will only be phased out in 2019 or 2020. Companies affected may seek advice on how to best mitigate the gap in timing between BEPS outcomes and CTR III implementation.

Hans Rudolf Habermacher (hhabermacher@deloitte.ch) and René Zulauf (rzulauf@deloitte.ch)

Deloitte

Tel: +41 58 279 6327 and +41 58 279 6359

Website: www.deloitte.ch

more across site & bottom lb ros

More from across our site

The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.
Tax authorities and customs are failing multinationals by creating uncertainty with contradictory assessment and guidance, say in-house tax directors.
The CJEU said the General Court erred in law when it ruled that both companies benefitted from Italian state aid.
An OECD report reveals multinationals have continued to shift profits to low-tax jurisdictions, reinforcing the case for strong multilateral action in response.
The UK government announced plans to increase taxes on oil and gas profits, while the Irish government considers its next move on tax reform.
War and COVID have highlighted companies’ unpreparedness to deal with sudden geo-political changes, say TP specialists.
A source who has seen the draft law said it brings clarity on intangibles and other areas of TP including tax planning.
Tax consultants say companies must not ignore financial transactions in their TP policies as authorities, particularly in the UK, become more demanding.