Federal Council launches consultation on third series of corporate tax reforms

Bern, 22.09.2014 - At its last meeting, the Federal Council decided to launch the consultation on the third series of corporate tax reforms. The reform is designed to develop the Swiss tax system further and boost competitiveness while taking international developments into account. Switzerland's appeal as a tax location should be enhanced and companies should continue to make an important contribution to financing the tasks of the federal government, the cantons and the communes. The draft is the result of several years of preparatory work in which the cantons and businesses were closely involved.

Switzerland's attractive tax environment for companies has made a significant contribution to the country's prosperity in recent years. Companies based here create jobs, make investments and provide an important source of tax revenue.

Companies with cantonal tax status have accounted for around half of the Confederation's profit tax receipts in recent years. Because of international developments, namely in the OECD, it would appear that these currently applicable arrangements will no longer be in keeping with international standards. As a result of this diminishing acceptance, companies are confronted with reduced legal and planning certainty.

The aim of the latest corporate tax reform is to consolidate international acceptance of Switzerland as a business location. This will provide clarity for companies with respect to the key legal parameters. At the same time, a package of further measures is designed to improve the system of corporate tax legislation and its balance.

Tax policy measures

The Federal Council is proposing to abolish existing arrangements that will no longer be in keeping with international standards. These primarily include the cantonal tax statuses for holding, domiciliary and mixed companies.

A royalty box and interested-adjusted profit tax are to be newly introduced. Moreover, the cantons should have the opportunity to introduce targeted capital tax reductions. In addition, a package of measures should improve the tax legislation system. These include the abolition of the issue tax on equity capital, adjustments to participation deductions and the offsetting of losses, as well as comprehensive rules for the disclosure of hidden reserves.

Finally, the taxation of participation holders should also be adjusted by introducing a balanced mix of tax-reducing and tax-increasing measures. In this way, the Federal Council wishes essentially to take account of the fact that the third series of corporate tax reforms is likely to lead to moderate profit tax reductions in the cantons. These measures include the taxation of capital gains on securities as well as adjustments to the partial taxation system for dividends.

Fiscal policy measures

The tax policy measures are implemented largely in the cantons and their communes, where they lead to greater reductions in receipts than is the case for the Confederation. By contrast, the Confederation benefits from the strengthening of tax competitiveness in the case of direct federal tax receipts. The federal government therefore intends to use vertical equalization measures amounting to a billion francs to ensure a balanced distribution of the burden between the Confederation and the cantons. This objective is to be achieved by increasing the cantons' share of direct federal tax.

The established system of national fiscal equalization is to be maintained. However, it is necessary to make adjustments to the mechanics of the system in order to reflect the new tax policy realities in the wake of the corporate tax reform. The reduced fiscal utilizability of profits is to be taken into account in the future by means of new weighting factors. Moreover, a supplementary contribution is to ensure, during a transitional period, that the financially weakest cantons do not fall below the minimum financing target under the current system.

To the extent that the financial implications of the various reform components can be quantified, a burden totalling approximately CHF 1.7 billion will be created for the federal budget, with some of the additional expenses of CHF 2 billion being offset by CHF 0.3 billion in new receipts from the introduction of the capital gains tax. A structural surplus of around CHF 1 billion is to be built up for counter-financing. The increase in the number of tax inspectors should also help generate additional receipts.

Next steps

The consultation will last until 31 January 2015. Aside from the feedback received in response to the consultation, international developments that occur in the meantime are also to be taken into account as work progresses.

Address for enquiries

Tax policy:
Beat Furrer, Head of Communications, Federal Tax Administration FTA
tel. +41 58 464 90 00, kommunikation@estv.admin.ch

Fiscal policy:
Philipp Rohr, Communications Officer, Federal Finance Administration FFA
tel. +41 58 465 16 06, philipp.rohr@efv.admin.ch

International aspects:
Mario Tuor, Head of Communications, State Secretariat for International Financial Matters SIF
tel. +41 58 462 46 16, mario.tuor@sif.admin.ch


The Federal Council

The Federal Tax Administration

State Secretariat for International Financial Matters