Switzerland’s cantonal government of Zug, on September 19, announced the cornerstones of corporate tax reform III (CTR III), designed to create a tax environment that maintains the canton as an attractive place to invest but also bring it in-line with international tax standards, such as those developed in OECD/G20 base erosion profit shifting (BEPS) project.
The canton’s new plan calls for the abolition of tax benefits and special tax regimes, like the holding regime and mixed companies regime, substituting a tax system that the government claims will impose only a moderately higher tax burden on entities that took advantage of those regimes.
Under the plan, the ordinary corporate income tax rate is reduced from 14.6% to approximately 12%. Further, to maintain canton of Zug as an attractive place for business, both nationally and internationally, the CTR III will provide for:
- the introduction of a patent box with a cantonal tax relief of 90%;
- a cantonal tax deduction of 150% on research and development (R&D);
- the implementation of a notional interest deduction;
- an increase in the taxation of qualifying dividends from 50% to 60% (as required by federal law);
- a maximum relief of 80% of net profit in total, with an adjustment for annual capital tax.
The government assures that its new plan shall be neutral, without noteworthy financial losses to the canton and municipalities, and without passing on any extra tax burdens to private taxpayers.
Davide Anghileri
Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.
Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.
Davide can be reached at [email protected].
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