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Nathalie Urban |
Ruth Kälin |
The Schaffhausen government has submitted a draft revision of the cantonal tax law to the cantonal parliament. Among others, the draft foresees a reduction of the statutory corporate income tax rate from 5% to 4% from January 1 2013.
This would reduce the combined (federal, cantonal and communal) effective tax rate of an ordinarily taxed corporation domiciled in the city of Schaffhausen from 15.96% to 14.46% (assuming the multiplier remains unchanged).
As mentioned, the draft revision still needs to be approved by the cantonal parliament. If approved, the decision of the cantonal parliament might be subject to a referendum.
Many international companies applying US GAAP or IFRS are domiciled in or have subsidiaries domiciled in the canton of Schaffhausen. Therefore the tax accounting implications of the proposed tax rate change have to be assessed.
Deferred taxes are measured using tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Under ASC 740 this measurement should be based on tax rates/laws that have been enacted. IAS 12 requires the use of tax rates/tax laws if and as soon as they are substantively enacted. In the context of the proposed tax rate change in Schaffhausen, substantive enactment would for example occur if and when it becomes certain that no referendum will take place.
Given the fact that the cantonal parliament has not yet approved the revision and considering that a potential approval may still be subject to a referendum, the prospective tax rate decrease should not yet be considered as (substantively) enacted for tax accounting purposes under US GAAP and IFRS.
With this draft revision, the canton of Schaffhausen indicates its intention to further increase its attractiveness as a location for corporations. It would become one of the cantons with the lowest tax rates in Switzerland.
For tax accounting purposes, the further development of the legislative process should be monitored to ensure appropriate tax rates are used to calculate deferred taxes once the (substantive) enactment of the lower tax rate has taken place.
Nathalie Urban (nathalie.urban@ch.pwc.com) & Ruth Kälin (ruth.kaelin@ch.pwc.com)
PwC
Tel: +41 58 792 44 30/17
Website: www.pwc.ch
