Federal Tax Administration FTA Swiss Corporate Tax Reform (Tax Proposal 17) IFA – RUSSIAN INTERNATIONAL TAXATION WEEK Financial University, Moscow, 10 April 2018
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) Overview 1. Why? International Context and Domestic Background 2. How? Goals and Strategy 3. What? Key Measures of the Reform 4. Who? Rate Reduction on Cantonal Level 5. When? History and Outlook Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) Why? International Context and Domestic Background Key aspects of domestic background • Economic and fiscal importance of corporate taxes for Switzerland • Fiscal federalism, tax competition between cantons and financial transfer system • Impact of international developments Tax reforms in various jurisdictions Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) How? Goals and Strategy Competitive tax burden area of tension International Tax yield acceptance Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) How? Goals and Strategy Goal Action International acceptance • Abolish cantonal tax regimes • Combination of new tax regimes and statutory rate Competitive tax burden reductions on cantonal level • Targeted new tax regimes to limit statuary rate reductions • Increase in partial dividend taxation Tax yield • Limitation of overall tax relief • Raise the cantons' share of direct federal tax revenue • Adjustments to fiscal equalization Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) What? Abolish Cantonal Tax Regimes • Holding companies : basically long term holding and managing of financial interests. • Management companies : no commercial activity in Switzerland just management functions (domiciliary companies). • Mixed companies : only subordinated commercial activities in Switzerland. � No tax status on Federal level. Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) What? Patent Box 100 % Design according to Federal Maximum scope according to Council: OECD-standard • only domestic R&D (in line with OECD-standards) Amount of tax relief • focus on patents • mandatory for the cantons Non- Software patented Patents innovations by SMEs Definition of qualifying IP Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) What? R&D Super Deduction 100 % Design according to Federal Council: Amount of additional deduction • definition of R&D according the Federal Act on the Promotion of Research and Innovation • focus on personnel expenses 50 % plus uplift (35 %) • optional for the cantons Basic Applied research research Definition of R&D Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) What? Limitation of Overall Tax Relief Design according to Federal Paten Council: t box • new tax regimes shall not result in a zero taxation R&D • mandatory for the cantons Super Dedu c- At tions least 30 % of profit to be taxed Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) What? Dividend Taxation Design according to Federal Council Partial taxation of dividends • applies to individual shareholders holding a participation of at least 10 % in a company • taxation • on federal level = 70 % • on cantonal level ≥ 70 % Investment deductions for holdings: no changes planned Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) Who? Rate Reductions on Cantonal Level (not part of TP 17) • Direct Federal Tax on profit = 8,5 % • Overall tax burden on profit in cantonal (effective 7,8 %) capital (federal, cantonal and municipal taxes) • Today : • 12 .3 % (LU) – 24 .2 % (GE) • Lower with cantonal tax regimes • from 2020 earliest (prov.): • 12 .1 % (ZG/NW) – 18 .2 % (AG) Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Swiss Corporate Tax Reform – Tax Proposal 17 (TP17) When? History and Outlook • 12 th February 2017: Swiss voters reject Corporate Tax Reform III (CTR III) • 2017: preparation of the new tax reform Tax Proposal 17 (TP17) • March 2018: Federal Council submited draft legislation to parliament • 2018: debate in parliament • 2019: potential popular vote • 2020: earliest date of entry into force Claude Grosjean, lic. iur., Attorney-at-law Federal Tax Administration FTA Deputy Head Tax Legislation Division ‹#›
Federal Tax Administration FTA Thank you! Questions? Discussion?
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