Today, after a long debate, Swiss Parliament finally agreed on the corporate tax reform III ("CTR III").
In addition to expected reductions of corporate income tax rates at Cantonal level, the following main measures shall strengthen the attractiveness and competitiveness of Switzerland's tax environment.

  • Introduction of a notional interest deduction (“NID”); and
  • Swiss patent box.

Historical background – initial draft of the bill

As reported earlier by us (see Tax Briefing October 2014), Switzerland is currently in the process of adjusting Swiss tax law to meet the demands of the European Union and the OECD criticizing that Switzerland does offer privileged tax regimes for ring fencing purposes. The Swiss Federal Council foresees adjusting Swiss tax law through the introduction of a new CTR III which should prevent Swiss companies from seeking other tax attractive jurisdictions.

Presumably after 2019 and irrespective of CTR III, the regime of tax privileged companies (e.g. so-called mixed companies or domicile companies, finance branches and principal companies) will be no longer in effect. Additionally, tax privileges for holding companies will no longer be valid at that time. However, dividend income of qualifying participations remain exempt from corporate income tax on both Federal and Cantonal levels.

Other measures foreseen

The revised draft for CTR III includes the following important measures:

  • Introduction of NID
  • The NID would enable companies (especially financing companies) with excessive equity to deduct a notional interest on that excessive equity. Depending on the concrete figures, it is possible as an effect of the NID that the effective tax rate would be reduced to the region of 2% to 3%.
  • Tax neutral disclosure of hidden reserves for tax privileged companies (holdings, mixed companies, etc.) and in case of migration of companies to Switzerland (so-called step up).
  • Introduction of a patent box with the option for Cantons of a full relief for qualifying IP income.
  • Introduction of R&D special deductions. The effective relief shall be decided by the Cantons.


Left wing parties announced that they will likely call a referendum. In light of the CTR III, Swiss resident companies – especially those with privileged tax status – may be well advised to proactively analyse their current and future tax situation. The majority of the Cantons has already announced a significant reduction of their future income tax rates (e.g. Canton of Vaud: reduction to 13.8% from the year 2019 onwards; Canton of Zug: reduction to approx. 12%).