On September 23, 2016 the Swiss Federal Council issued a press release announcing that on that same date it has initiated the consultation procedure on an amendment to the Withholding Tax Ordinance. According to the Swiss Federal Council the aim of the proposed amendments is to strengthen financing activities of groups in Switzerland. The consultation period runs until December 23, 2016.
In the press release the Swiss Federal Council states the following:
“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 is proposing an amendment to 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. With the proposed amendment, intra-group interest payments of the Swiss guarantor are no longer to be subject to withholding tax in all cases. Forwarding of funds from the foreign issuer to a group company established in Switzerland should still be possible up to the maximum amount of the equity capital of the issuer.
The reform of the Withholding Tax Act proposed by the Federal Council (switchover to the paying agent principle), as indicated on 18 December 2014 in the consultation, 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 subsequent timetable is unknown. Against this backdrop, the Federal Council is proposing this amendment of the Withholding Tax Ordinance to enhance the appeal of Switzerland as a business location.”
The following documents were attached to the press release:
- Draft Ordinance on Withholding tax (in German, French or Italian)
- Consultation process for amending the regulation on the Withholding Tax Ordinance (group financing) – Explanatory Report (in German, French or Italian)
- A letter to the Cantons (in German, French or Italian)
- A letter to organizations (in German, French or Italian)
- List of addressees
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