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Switzerland: The End Of Switzerland's Cantonal Tax Regimes Is Near: What's Next?

Friday, 20 September 2013   (0 Comments)
Posted by: Author: Thierry Obrist (Walder Wyss Ltd)
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Author:  Thierry Obrist (Walder Wyss Ltd)

On May 17 a steering committee, consisting of the Swiss finance minister, the commissioner of the Swiss Federal Tax Administration, the head of the Swiss Finance Administration, the state secretary for International Finance Matters, and four cantonal finance directors, published an intermediate report regarding how the cantonal tax regimes challenged by the European Union could be replaced in a way that maintains Switzerland's attractiveness for foreign investors.1

While the intermediate report, ''Measures to Reinforce the Tax Competitiveness (Corporate Tax Reform III),'' is not an official document emanating from the Swiss federal government (the Federal Council), given that it expresses the common view of highranking members of the Federal Finance Department and the finance directors of major cantons, it is an important compromise in a matter in which the interests of the confederation and the cantons are not always identical. Also, since the Swiss finance minister will be in charge of conducting the negotiation with the EU, it can be expected that the Federal Council will endorse the report.

The report notes that the existing cantonal tax regimes (holding, domiciliary, and mixed companies), three pillars of the attractiveness of the Swiss corporate tax system, cannot be maintained any longer. To preserve the attractiveness of Switzerland even with this fundamental change in tax policy, alternatives must be provided.

The suggested measures will have a fundamental impact on the Swiss corporate tax system as a whole and therefore deserve close attention. Besides lowering the cantonal tax rates, the report proposes the implementation of a privileged taxation of income from intellectual propery rights (license box) and - at least for Switzerland - a very innovative deemed deduction of notional interest on equity. Several other modifications of the tax system are also discussed or at least touched on in the report.

After a presentation of the critiques raised by the EU toward the Swiss corporate tax system, this article provides an overview of the proposals made by the steering committee and demonstrates that the abolition of privileged cantonal regimes will not impair the attractiveness of Switzerland if it is accompanied by the appropriate measures to improve the present corporate tax system. The article will then focus and comment on the suggested modifications made in the intermediate report under review.

 To read the full article, please click here.

 This article first appeared in



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