May 2019
Tax Newsletter
voters approved the new corporate tax reform. The reform will set the basis for new rules on Swiss corporate taxation and will secure and enhance Switzerland's overall attractiveness as a business location. The measures will enter into force in 2020.
Maurus Winzap lic. iur., LL.M., Attorney at Law Certified Tax Expert Telephone +41 58 658 56 05 [email protected]
Robert Desax lic. iur., LL.M. (tax), Attorney at Law Certified Tax Expert Telephone +41 58 658 52 77 [email protected]
Tax Newsletter May 2019
Switzerland adopts new corporate tax reform
The new proposal aims to set the basis for new rules on Swiss corporate tax (the last proposal having been rejected in a nationwide referendum in February 2017) and secure and enhance Switzerland's overall attractiveness as a business location. The reform includes a patent box, an R&D super deduction and a notional interest deduction ("NID") for high-tax cantons. There are also substantial non-tax (revenue-raising) measures and new provisions on social security contributions. At the same time, Switzerland will repeal the existing special corporate tax regimes (eg, finance branches, mixed, domiciliary, principal and holding company regimes). Moreover, the bill took into account the criticism that contributed to the rejection of the February 2017 referendum. The measures will enter into force in 2020.
Measures
A 50% additional (super) deduction
The following measures are included in
for R&D costs incurred in Switzer-
the new bill:
land on a cantonal level will be intro-
The introduction of transitional rules for companies benefiting from can-
duced, based on R&D salary costs plus a mark-up.
tonal tax regimes such companies An optional NID may be introduced
may release existing hidden re-
by high tax cantons (currently only
serves (including goodwill) in a tax-
the Cantons of Zurich, Berne and
privileged way. This should allow
Aargau would meet the proposed re-
Swiss companies to keep their cur-
quirements, but so far only Zurich
rent tax charge for another five years
has expressed the intention to do so).
after the special tax regimes end. Corporations need to make first decisions in this respect already in the course of the year 2019.
The introduction of a maximum relief limitation the combined tax relief on a cantonal level from the aforementioned measures should not ex-
The introduction of a mandatory can-
ceed 70% (ie, they may not reduce
tonal patent box in line with the stan-
the taxable income to less than 30%).
dards of the Organisation for Economic Cooperation and Development (OECD) a 90% exemption is available on qualifying income (determined on the basis of the modified nexus approach), whereby software is excluded. Qualifying income is likely to include IP development by related parties within Switzerland or by unrelated third parties abroad (ie, outsourcing). Embedded IP income must be determined based on the residual profit method. On entry into the patent box, past tax-deductible
The cantons may introduce relief on the capital tax levied annually on equity capital and may also grant relief on equity relating to intra-group loans.
Statutory provisions will be introduced relating to the tax consequences of companies entering (full tax-free step-up) or exiting Switzerland.
Foreign tax credit provisions will be extended to Swiss branches of nonresident companies.
expenses will be included in the tax- The cantonal share in the federal tax
able income ("entry ticket").
revenues (currently 17%) will be
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Tax Newsletter May 2019
increased to 21.2%.
which the tax exemption of capital
Although not formally part of the package
The bill also includes further revenue-
contribution reserves was approved that was voted on, most cantons envisage
raising measures which are meant to
in a nationwide referendum). The pur- more or less significant reductions of the
cross-finance the reform and garner wid-
pose is to protect companies that mi- cantonal corporate income tax rates as
er political support:
grated to Switzerland in reliance on part of their cantonal implementation
The harmonisation and increase of minimal tax on qualifying dividends (ownership of 10% or more) at least 50% of the dividends will be subject
the tax exemption. Further, the new distribution rule will apply only to companies listed on a Swiss stock exchange.
projects.
Overview of cantonal implementation
The cantons continue to implement the new rules into the respective cantonal tax
to income tax on a cantonal level and There will be stricter rules regarding laws all with the aim of rolling out the
70% on the federal level.
transpositions (which apply to private changes to the cantonal tax rules on
The introduction of new distribution rules for publicly listed companies in terms of retained earnings, listed
restructurings involving transfers of securities to personally controlled holding companies).
1 January 2020. Depending on the status of the political and legislative procedures, a cantonal vote may still be required dur-
companies may no longer repay tax- A 0.3% increase in social security
ing the second half of 2019 in one or the
free capital contribution reserves
contributions paid by employees and other canton.
first, but must pay (at least) an equal
employers to the old age and survi-
For the details of these measures, please
amount of dividends subject to with-
vors' insurance (AHV/AVS) and an in- see the table on page 4.
holding tax (and income tax in case of Swiss residents) if other reserves from retained earnings are available. However, these rules will not apply to companies that moved to Switzerland after 24 February 2008 (the date on
crease in the VAT share and federal contributions that are allocated to the AHV/AVS. These measures are expected to generate approximately CHF 2 billion in additional funding for the Swiss social security system.
Overview of effective corporate income tax rates
Some cantons will offer ordinary corporate income tax rates as low as approximately 12% (see table below).
ZG LU GL SH UR AI NW OW BS AR TG BL NE FR VD GE GR SZ SG JU VS TI ZH AG SO BE
0.0%
After Reform Before Reform
5.0%
10.0%
15.0%
20.0%
25.0%
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Tax Newsletter May 2019
Comments
The popular vote of 19 May 2019 marks the end of a long enduring political and legislative process. Switzerland will eventually repeal corporate tax rules that had attracted a lot of criticism from other countries (some of this criticism dating already back to the pre-BEPS era). At the same time, Switzerland is going to introduce new progressive measures which
are compatible with international standards and which should allow the country to defend its traditional premium ranking as a location for international businesses.
In the course of 2019, companies will need to review their structures and the effects of the new rules, especially the transitional rules and take appropriate action in order to ensure a smooth and tax-efficient transition to the post-tax
reform environment.
Public companies listed on a Swiss stock exchange may wish to consider a conversion of existing capital surplus into share capital in order to counter the new distribution rules and repay such funds taxfree to its shareholders in the future by way of a share buyback followed by a formal capital reduction.
For further information on this topic, please contact Maurus Winzap or Robert Desax at Walder Wyss by telephone (+41 58 658 58 58) or email ([email protected] or [email protected]). The Walder Wyss website can be accessed at www.walderwyss.com.
The Walder Wyss Newsletter provides comments on new developments and significant issues of Swiss law. These comments are not intended to provide legal advice. Before taking action or relying on the comments and the information given, addressees of this Newsletter should seek specific advice on the matters which concern them. Walder Wyss Ltd., Zurich, 2019
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Implementation of the corporate tax reform in the cantons (frequently still subject to political and legislative processes)
Canton
Patent box Super R&D Release of existing relief deduction hidden reserves (special rates)
Full tax-free step-up of existing hidden reserves
(under existing law)
Maximum Ordinary corporate income Ordinary corporate income Minimal taxation of
relief
tax rates after reform tax rates before reform qualifying dividends
limitation
(in cantonal capital)
(in cantonal capital)
(private assets)
Minimal taxation of qualifying dividends
(business assets)
Aargau Appenzell Ausserrhoden Appenzell Innerrhoden Basel-Landschaft Basel-Stadt Berne Fribourg Geneva Glarus Graubnden Jura Lucerne Neuchtel Nidwalden Obwalden Saint Gall Schaffhausen Schwyz Solothurn* Thurgau Ticino Uri Valais Vaud Zug Zurich
90% 50%
2.5%
50% 50%
1.3% / 2.6%
30% -
2.0%
90% 20%
2.2% / 2.6%
90% -
3.0%
90% 50%
0.5%
90% 50%
-
90% 10%
2.8%
10% -
1.5%
70% -
0.5%
90% 50%
0.5%
10% -
0.4%
20% 50% not yet defined
90% - 1.2%-1.8%
90% 50% not yet defined
50% 40%
0.5%
90% -
0.8%
90% 50%
0.4%
90% 50%
1.0%
40% -
0.5%
90% 50%
3-4%
30% -
1.2%
90% 50% not yet defined 90% 50% not yet defined
90% 50%
0.8-1.6%
90% 50%
0.5%
*First cantonal proposals however rejected in cantonal vote on 19 May 2019.
Yes 70% Yes 50% No 50% Yes 50% Yes 40% Yes 70% No 20% No 9% Yes 10% Yes 70% Yes 70% Yes 70% No 40% Yes 70% Yes 70% Yes 40% Yes 70% Yes 70% Yes 50% Yes 50% Yes 30% Yes 50% No 50% No 70%
Yes 70% Yes 70%
18.6% 13.0% 12.7% 13.5% 13.0% 21.6% 13.7% 14.0% 12.4% 14.0% 15.0% 12.3% 13.6% 12.0% 12.7% 14.5% 12.4% 14.1% 13.1% 13.4% 17.0% 12.6% 17.0% 13.80%
11.9% 18.2%
18.6% 13.0% 14.2% 20.7% 22.2% 21.6% 19.9% 24.2% 15.7% 16.1% 20.7% 12.3% 15.6% 12.7% 12.7% 17.4% 15.7% 15.0% 21.4% 16.4% 21.0% 14.9% 21.6% 21.0% 14.6% 21.2%
50% 60% 50% 60% 80% 50% 70% 70% 70% 70% 70% 60% 60% 50% 50% 70% 60% 50% 60% 70% 70% 60% 60% 70% 50% 60%
50% 60% 50% 60% 80% 50% 70% 60% 70% 70% 70% 50% 60% 50% 50% 70% 60% 50% 60% 70% 70% 60% 50% 70% 50% 60%
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Our tax team
Tax Newsletter May 2019
Martin Busenhart Partner, Zurich
Phone +41 58 658 55 80 [email protected]
Samuel Drr Partner, Berne
Phone +41 58 658 29 02 [email protected]
Thomas Meister Partner, Zurich
Phone +41 58 658 55 73 [email protected]
Stephan Neidhardt Partner, Zurich
Phone +41 58 658 55 70 [email protected]
Fouad G. Sayegh Partner, Geneva
Phone +41 58 658 30 35 [email protected]
Maurus Winzap Partner, Zurich
Phone +41 58 658 56 05 [email protected]
Robert Desax Partner, Zurich
Phone +41 58 658 52 77 [email protected]
Janine Corti Counsel, Zurich
Phone +41 58 658 56 49 [email protected]
Jan Ole Luuk Counsel, Zurich
Phone +41 58 658 56 12 [email protected]
Peter Hongler Counsel, Zurich
Phone +41 58 658 56 82 [email protected]
Fabienne Limacher Managing Associate, Zurich
Phone +41 58 658 52 81 [email protected]
Marius Breier Managing Associate, Zurich
Phone +41 58 658 56 58 [email protected]
Ursina Gremminger Associate, Zurich
Phone +41 58 658 52 47 [email protected]
Yacine Rezki Associate, Geneva
Phone +41 58 658 30 29 [email protected]
Hans-Jrg Schmid Associate, Zurich
Phone +41 58 658 56 28 [email protected]
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Walder Wyss Ltd. Attorneys at Law
Phone + 41 58 658 58 58 Fax + 41 58 658 59 59 [email protected]
www.walderwyss.com Zurich, Geneva, Basel, Berne, Lausanne, Lugano
