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Switzerland: Swiss Tax Reform Proposal 17: Swiss Federal Council submits dispatch to Swiss Parliament

On March 21 2018, the Swiss Federal Council sent to the Swiss Parliament the dispatch on the draft legislation for the so-called Swiss Tax Reform Proposal 17. This legislative version is largely in line with the legislative draft version that was submitted for the consultation process last autumn. It represents a well-balanced solution that would ensure that Switzerland remains an attractive location for multinationals and domestic companies alike.

Main proposed elements of STR 17:

  • 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 (transition mechanism) 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 effect 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% to 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, with a reduction of qualifying patent income on a cantonal level of up 90%, whereas the cantons can opt for a lower reduction than 90%;
  • The voluntary introduction of cantonal R&D incentives in the form of deductions of up to 150% of qualifying R&D expenditure incurred in Switzerland 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, while the same mechanism will be applied upon an exit from Switzerland;
  • An increase of the partial taxation for individual shareholders holding at least 10% in a Swiss company to 70% from 60% on a federal level and mandatorily at least to 70% for all cantons, whereas the cantons can opt for a higher percentage of taxation than 70%;
  • The combined tax relief of all income tax measures will be limited to a maximum of 70% on a cantonal and communal level, whereas the cantons can opt for a lower maximum than 70%; and
  • The voluntary introduction of reduced annual capital tax rates on equity that is underpinning qualifying participations of at least 10% or patents.

Expected timeline

The Swiss Parliament is expected to vote on the legislation in its autumn 2018 session at the earliest. If there is no referendum, some parts of STR 17 could theoretically enter into force as soon as in 2019, with the bulk of it becoming law in 2020.


Jacques Kistler ( and René Zulauf (
Tel: +41 58 279 8164 and +41 58 279 6359

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