Group financing in Switzerland to be facilitated
Bern, 10.03.2017 - The Federal Council wants to strengthen the financing activities of groups in Switzerland. During its meeting on 10 March 2017, it approved the changes to the Withholding Tax Ordinance. The amendments will enter into force on 1 April 2017.
At present, groups established in Switzerland often carry out targeted financing activities abroad. In this way, they avoid withholding tax, which would be due in certain situations were they to conduct the financing via group companies established in Switzerland. The Swiss economy thereby misses out on some of the added value in this sector.
For this added value to be retained in Switzerland, the Federal Council proposed adapting the Withholding Tax Ordinance. This amendment concerns those groups in which a Swiss group company (guarantor) provides a guarantee for a bond of a foreign group company (issuer) belonging to the same group. Forwarding of funds from the foreign issuer to a group company established in Switzerland will be possible up to the maximum amount of the equity capital of the issuer without the interest on it being subject to withholding tax.
Insofar as the ordinance amendment now decided strengthens the establishment of headquarter activities with further central corporate functions in general and treasury activities in particular, value creation will be enhanced. This will give rise to additional tax receipts in terms of these companies' profit tax (direct effect), suppliers' profit tax (indirect effect) and the income tax and VAT of additional employees and higher paid staff (induced effect). In contrast, any short-term reductions in withholding tax receipts should be negligible.
The proposal for a reform of the Withholding Tax Act (switchover to the paying agent principle) submitted by the Federal Council for consultation on 17 December 2014 would sustainably resolve the current problems in principle. However, the reform has been suspended for the time being (awaiting the outcome of the vote on the popular initiative "Yes to protecting privacy"), and the next steps will be decided after the vote.
Address for enquiries
Communications, Federal Tax Administration FTA
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Last modification 05.01.2016