Corporate tax reform (Switzerland)

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The corporate tax reform (USR) is a bundle of legislative measures aimed at simplifying taxation in Switzerland .

Corporate tax reform I

The 1997 reform included various changes to the Federal Law on Direct Federal Taxes (DBG), the Tax Harmonization Law (StHG), the Federal Law on Stamp Duties (StG) and the Federal Law on Withholding Tax (VStG). Most of the measures came into effect on January 1, 1998.

With the corporate tax reform I, special tariffs were introduced for holding, domicile and mixed companies as well as a proportional profit tax of 8.5 percent and the abolition of the capital tax at federal level.

In the area of ​​stamp duties, it was decided to reduce the issue tax on participation rights, to reorganize the exemption limit and to reintroduce a tax on life insurance policies.

In addition, the legislature issued a regulation for the acquisition of own shares.

Corporate tax reform II

Legislative process

In the spring session of 2007, the federal councils passed the Corporate Tax Reform Act II. The measures adopted included various changes to the Federal Act on Direct Federal Taxes (DBG), the Tax Harmonization Act (StHG), the Federal Act on Stamp Duties (StG), the Federal Act on Withholding Tax ( VStG) and the federal law on the creation of tax-privileged job creation reserves (ABRG).

As the referendum was held, a referendum was held on February 24, 2008. The proposal was accepted. Most of the provisions came into force on January 1, 2011.

Reduction of the double burden

Profits from entrepreneurial activity are usually taxed several times: the company pays income taxes, and when the profits are distributed, the shareholders are taxed again.

With the Corporate Tax Reform II, only 60% of the income from participations representing private assets is included in the assessment for income tax and participations representing business assets are only 50% included in the assessment for profit tax.

The prerequisite for the reduced taxation is that the stake is at least 10% in the share capital of the company or cooperative. Profits from the sale of participation rights that represent business assets are also only half taxable after deduction of the attributable expenses.

The StHG leaves the cantons free to provide a comparable reduction in taxation. If they introduce such a reduction, this is only possible if the participation is also at least 10%.

According to previous law, holding companies could claim a reduction in profit tax in the form of a participation deduction, provided they held at least 20% of the share capital of other companies or if this participation had a market value of more than 2 million francs (Art. 69 DBG). The threshold for asserting the participation deduction has now been reduced to 10% or a market value of at least CHF 1 million. The participation deduction also applies to the holders of those participation rights that grant a claim to at least 10% of the profits and reserves of another company.

Reduction of substance-sapping taxes

An exemption of 1 million francs now also applies to the issue tax for cooperatives. This tax exemption already applied to corporations.

If the operation of a corporation or a cooperative with a deficit is transferred to a rescue company for the purpose of continuation, the new capital required for this is excluded from the issue tax. In the case of restructuring, capital increases and grants are exempt from the issue tax, provided that the existing losses are eliminated and the contributions of the shareholders or cooperative members total a maximum of CHF 10 million.

The corporate tax reform II introduced the capital contribution principle. According to this, all capital contributions made by shareholders, including premiums and subsidies, are treated in the same way as the repayment of share capital when repaid to private assets and are therefore tax-free.

According to the old law, the cantons also had to levy the entire capital tax on companies that generate only a small profit. With the option of offsetting profit tax against capital tax, the cantons can reduce this substance-sapping taxation of companies with high capital investment but low profitability. It is up to the cantons whether they want to make use of this option. The federal government does not levy any capital tax.

Relief for private companies

If a property is no longer primarily used for business purposes, the hidden reserves were previously taxed. The entrepreneur can now demand that the tax is only assessed when the property is sold and the proceeds from the sale are actually realized.

The leasing of the business is only considered to be giving up self-employment with tax consequences if the entrepreneur applies for this to the tax authorities.

In the case of an inheritance, those heirs who do not take over the business can now postpone taxation of the hidden reserves until the actual sale.

The sale of operationally necessary assets can lead to tax consequences if there are hidden reserves on these properties, although the capital must remain tied up in the company. The rules for deferred taxation have been simplified.

If self-employment is given up, all hidden reserves on the business assets are realized. This liquidation profit represents taxable income for the entrepreneur. Its taxation is now carried out separately, so that the ordinary income is not subject to tax progression . In a further step, when calculating the tax, the amount can now be deducted that is used to purchase contribution years in the occupational pension scheme.

If a partnership holds securities in its business assets, the original acquisition costs are now taxed instead of the market value of the securities.

Change in savings book privilege

According to the old law, the annual interest income on each individual savings book of up to 50 francs was not subject to withholding tax. This privilege now applies to interest income of up to CHF 200 a year, provided the interest income from all a person's credit does not exceed this amount.

Abolition of the job creation reserves

According to the old law, companies were able to create tax-privileged so-called job creation reserves. These reserves were available to companies to create jobs in difficult times when they were officially released. The regulation has been repealed.

Corporate tax reform III

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The third reform was intended to restore international acceptance of Swiss corporate taxation. The Swiss practice of reduced taxation of foreign income for holding , domiciliary and mixed companies (so-called status companies ) at cantonal level was criticized internationally .

The corporate tax reform III therefore wanted to combine two measures:

  1. Abolish tax privileges for status companies in order to remove international reservations.
  2. Provide the cantons with new options for granting all companies tax relief. The overall lower taxation should be attractive enough so that the status companies could retain their location in Switzerland even after the preferential taxation was discontinued. In particular, innovation-intensive business activities in Switzerland should be promoted by taxing income from patents and comparable rights at a lower rate (so-called patent box). A deduction should be made for research and development that is greater than the actual research and development expenditure. Further measures related to profit taxation, adjustments to capital tax, adjustments to the lump-sum tax credit and the disclosure of hidden reserves. The reform also included extensive changes that would have redistributed the shares of the federal government and the cantons in tax revenue.

A referendum was held against the reform. The proposal came to a vote on February 12, 2017 and was rejected.

Tax proposal 17

After the corporate tax reform III (CTR III) was rejected by the electorate in a referendum on February 12, 2017 with 59.1% no votes, the Federal Department of Finance is continuing CTR III under the new title Tax Proposal 17 (SV17). In the months of March to May 2017, the steering body, consisting of representatives from the Confederation and the cantons, met five times to develop the recommendation for SV17. After the meetings, in which representatives of the cities, municipalities, political parties and business and employee associations were also heard, the steering body recommended the following core elements to the Federal Council :

  • Patent box : Introduction of a mandatory patent box in accordance with the OECD standard at cantonal level.
  • Deductions for research and development: The additional deduction for R&D costs may not exceed the actual costs by a maximum of 50%. The deductions should mainly focus on the personnel expenses.
  • Maximum relief: The tax relief on profit through the two above-mentioned instruments may not exceed 70%. This limits the scope for relief compared to corporate tax reform III.
  • Partial taxation of dividends: Partial taxation of dividends from qualifying holdings (at least 10% of capital) should be 70% at federal level and at least 70% at cantonal and communal level.
  • Vertical compensation: The federal government now pays the cantons 21.2% from the income from direct federal tax instead of 17%.
  • Clause to take into account the municipalities in connection with the increase in the canton's share of direct federal tax.
  • Child allowances: The minimum amount of child and education allowances is to be increased by 30 francs. The child allowances will increase to at least 230 francs. The training allowance should now be at least CHF 280.

Chronology of developments

On June 9, 2017, the Federal Council adopted the benchmarks for SV17 and commissioned the Federal Department of Finance to prepare a consultation draft by September. The benchmarks approved by the Federal Council essentially followed the recommendations of the tax authority. There was a deviation from the recommendation regarding the canton's share of the direct federal tax. According to the benchmarks adopted by the Federal Council, this should be increased to only 20.5% instead of 21.2%.

On September 6, 2017, the Federal Council opened the consultation process on SV17. It lasted three months and ended on December 6, 2017. As it turned out, ideas and opinions also diverged widely with regard to the new template.

On January 31, 2018, after discussions with the most important stakeholders, the Federal Council decided on the key figures for its dispatch on Tax Proposal 17, which were largely based on the consultation proposal. The most important deviation was that the Federal Council wanted to increase the canton's share of the direct federal tax from 17 to 21.2 percent instead of just 20.5 percent.

On March 21, 2018, the Federal Council passed the dispatch on tax proposal 17. It largely corresponded to the key figures of January 31. The results of a survey on the cantonal implementation plans were also published with the embassy. In the best case, parliament could pass the SV17 in the autumn session.

On May 15, 2018, the Commission for Economy and Taxes of the Council of States (WAK-S) voted unanimously in favor of an overall concept with four central elements for tax proposal 17:

  • Instead of increasing family allowances, every tax franc that is lost through SV 17 at all three levels should be counter-financed with one franc to finance the AHV. The counter-financing was provided by three additional wage percentages, the allocation of the entire additional percentage of VAT and an increase in the federal contribution.
  • Qualifying dividends should be taxed at least 50 percent at cantonal level and at least 70 percent at federal level.
  • The capital contribution principle should be adapted by introducing a repayment rule (proportionality principle).
  • The deduction for self-financing should generally not be permitted, with the exception of an optional rule for high-tax cantons.

On May 25, 2018, the Commission for Economy and Taxes of the Council of States (WAK-S) accepted this overall concept for tax proposal 17 with 11 to 1 votes and thus concluded the detailed consultation.

On June 7, 2018, the Council of States decided by 35 votes to 5 with 5 abstentions to link tax proposal 17 with the AHV restructuring.

Federal Act on Tax Reform and AHV Financing (TRAF)

With its resolution of June 7, 2018, the Council of States added a socio-political compensation in favor of the AHV in the amount of CHF 2 billion to tax proposal 17 (SV17). The bill was called the new Federal Law on Tax Reform and AHV Financing (TRAF). On September 28, the TRAF was accepted in the final votes of both councils and the bill was published in the Federal Gazette. The first TRAF measures should come into force at the beginning of 2019, the main part in 2020. After the referendum was called, the TRAF was adopted by a clear majority in the referendum on May 19, 2019.

Chronology of developments

On September 3, 2018, the National Council's Commission for Economics and Taxes (WAK-N) approved the tax proposal 17 with 12 to 11 votes with 2 abstentions. The WAK-N largely followed the draft of the Council of States and only applied for a change to the capital contribution principle (KEP).

In a letter dated September 7, 2018, the Conference of Cantonal Finance Directors (FDK) welcomed the work of the preliminary advisory commission WAK-N on tax proposal 17 and asked the National Council to approve the proposal in the interests of the preliminary advisory commission. In addition, the FDK once again underlined the urgency of the SV17 - a second no to the reform of corporate taxation could not be afforded.

On September 28, 2018, the TRAF was passed in the final vote by the National Council with 112: 67 votes and the Council of States with 39: 4 votes.

On November 15, 2018, the Swiss Federal Tax Administration (FTA) announced that it would no longer apply the federal practices on principal companies and Swiss finance branches to new companies from 2019 onwards in the course of the bill on tax reform and AHV financing (TRAF).

On January 17, 2019, the referendum committees submitted 61,381 signatures against the federal law of September 28, 2018 on tax reform and AHV financing (TRAF), which resulted in the referendum. In the referendum on May 19, 2019 , the TRAF was adopted with 66.4% yes-votes.

See also

Web links

Individual evidence

  1. ↑ The measures of corporate tax reform III at a glance. Federal Department of Finance FDF, November 30, 2016, accessed on February 1, 2017 .
  2. ↑ a b Corporate Tax Reform Act III (February 12, 2017) . Documentation from the EVS for voting, February 14, 2017
  3. ↑ Federal Tax Administration FTA: Steering body adopts recommendations on tax proposal 17. Accessed on May 10, 2018 .
  4. ↑ The Federal Council: Federal Council discusses the tax policy agenda and adopts key figures for tax proposal 17. Accessed on May 10, 2018 .
  5. ↑ Christina Neuhaus: The new tax reform is also in a difficult position . In: Neue Zürcher Zeitung . December 7, 2017, ISSN  0376-6829 ( nzz.ch [accessed on May 20, 2019]).
  6. ↑ Federal Tax Administration FTA: Federal Council determines benchmarks for dispatch on tax proposal 17. Accessed on May 10, 2018 .
  7. ↑ Federal Department of Finance FDF: Federal Council wants to secure jobs in the long term with tax proposal 17. Retrieved September 27, 2018 .
  8. ↑ Tax reform 17 - Press raw material for the media conference of the WAK-S on May 16, 2018. Accessed on September 27, 2018 .
  9. ↑ The "Tax reform and AHV financing" package is in place. Retrieved September 27, 2018 .
  10. ↑ The decisions of the Council of States on the tax proposal. Retrieved September 27, 2018 .
  11. ↑ Federal Act on Tax Reform and AHV Financing (TRAF) in the Federal Gazette
  12. ^ Federal Department of Finance FDF: Tax reform and AHV financing. Retrieved December 15, 2018 .
  13. ↑ Narrow approval of tax proposal 17. Accessed on September 27, 2018 .
  14. ^ Letter to the National Council. In: The Conference of Cantonal Finance Directors. Retrieved December 15, 2018 .
  15. ↑ View Business. Retrieved December 15, 2018 .
  16. ↑ TRAF - No more principal companies and Swiss finance branches from 2019. Accessed December 15, 2018 .
  17. ↑ Referendums against the TRAF bill and the Weapons Directive came about. Retrieved March 4, 2019 .
  18. ↑ Tax and AHV reform - Left-Green Alliance brings about a referendum. January 17, 2019, accessed March 4, 2019 .
  19. ↑ Federal Department of Finance FDF: Referendum on the Federal Act on Tax Reform and AHV Financing (May 19, 2019). Retrieved March 4, 2019 .