Switzerland’s corporate tax reform is the most fundamental reform in over 20 years. Food and drink businesses that have head quarters in Switzerland or commissionaire arrangements are likely to be impacted by the changes. Draft legislation is expected later this year but clarification for some of the main features of the reform has been provided including:
- Abolition of 5 special tax regimes: holding company, mixed company, domiciliary company, principal company, finance branch
- Abolition of 1% stamp tax on equity
- Significant decrease of cantonal income tax rates
- Introduction of patent box (to be confirmed)
- Introduction of notional interest deduction (to be confirmed)
The reform may also include changes of a more technical nature including the participation exemption.
As the reform is expected to cause major income shortfalls for the cantons, the measures to compensate for these shortfalls could include an increase of VAT rate (currently at 8%), the abolition or reduction of various income tax deductions for individuals and the introduction of capital gains tax on securities for individuals.
A first draft of the new law is expected for September 2014 although it is not known when the new law will come into force. However, given the political process in Switzerland, an introduction of the new law is not expected before 2018.
Switzerland is expected to do everything it can to keep its benefits as a favourable tax location. Yet for food and drink businesses which have Swiss head quarters and commissionaire arrangements it is advisable to consider the potential impact of the reform well ahead of time, which includes but is not limited to:
- Deferral of income to future tax periods may be beneficial due to expected lower tax rates
- Potential exit tax in case of leaving Switzerland or relocating to another canton
- Negotiate new tax rulings based on those aspects of the tax regime not expected to change