On September 6, 2017, the Swiss Federal Council opened a consultation on tax proposal 17. The Swiss Federal Council started the project “Tax proposal 17” after the failure of the third series of corporate tax reforms. The purpose of the proposal is to make a significant contribution to Switzerland remaining an appealing location and thus to added value, jobs and tax receipts.
The consultation will run for three months and ends on December 6, 2017. In a press release it is stated that the Federal Department of Finance (FDF) is planning to submit the dispatch for Parliament to the Federal Council in the spring of 2018. Consequently, the earliest that tax proposal 17 can enter into force is 2020.
Measures proposed in tax proposal 17 (TP17) include a.o.:
· Abolition of the arrangements for cantonal status companies – At cantonal level, status companies pay only a reduced profit tax or none at all. This preferential treatment will be abolished with TP17. Overtaxation will be avoided with a temporary special rate solution.
· Introduction of a patent box – Profits from patents and similar rights will be separated from other profits and taxed at a lower level. The relief may not exceed 90%. The arrangement is based on the current international standards.
· Additional deductions for research and development – There may be additional deductions of no more than 50% for research and development. The measure is aimed at domestic research and development. The decisive expenses are personnel expenses plus a flatrate supplement.
· Relief restriction – The tax relief based on the patent box and additional deductions for research and development may not be higher than 70% of the taxable profit. The calculation also includes amortization based on earlier taxation as a status company
· Increased dividend taxation – Dividend taxation for natural persons will be increased to 70% at federal and cantonal level. The cantons can provide for a greater increase.
· Capital tax adjustments – The cantons can include the capital associated with financial interests and patents and similar rights at a reduced level in the capital tax calculation.
· Disclosure of hidden reserves – Companies that relocate their headquarters to Switzerland can benefit from additional amortization the first few years. If headquarters are relocated abroad, an exit tax will be due, as is already the case at present.
· Transference adjustments – This measure will close a taxation gap in that the scope of tax-free capital gains and thus also the impact of the capital contribution principle will be restricted.
· Extension of the flat-rate tax credit – The flat-rate tax credit prevents international double taxation. Swiss operating companies of foreign companies should now be entitled to it as well.
· Fiscal equalization adjustments – To prevent upheaval among the cantons, fiscal equalization will be adjusted in line with the new reality in terms of tax policy.
With respect to the consultation the Swiss Federal Council has released a.o. the following douments:
· An explanatory report: consultation procedure on tax proposal 17 (German, French or Italian)
· Legislative text on tax proposal 17 (German, French or Italian)
· An ordinance on the reduced taxation of profits from patents and similar rights (German, French or Italian)
· An ordinance on fiscal equalization and cost compensation (German, French or Italian)
· A Letter to the cantons (German, French or Italian)
· A letter to the organizations (German, French or Italian)
· A list of addressees (German, French or Italian)
· A glossary (German, French, Italian or English)
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