Swiss panel offers revised corporate tax reform proposal

by Davide Anghileri

Following the rejection by popular referendum of Switzerland’s corporate tax reform III (CTR III) in February, a steering group charged with preparing a new plan for tax reform has presented its objectives and recommendations, called Tax Proposal 17 (TP17).

The aim of TP17, released June 1, is to create a tax environment that will be compliant with international tax principles and that will increase the attractiveness of Switzerland as a business location. However, at the same time, the reform should not decrease the level of the Swiss tax revenue, the steering group said.

The new proposal calls for the abolition of the arrangements for cantonal status companies; but, contrary to CTR III, it does not provide a transitional period.

Moreover, TP17 recommends a mandatory patent box compliant with the OECD standard at cantonal level, like CTR III did.

As did CTR III, the new proposal calls for research and development deductions that are optional at cantonal level, up to a maximum of 50 percent. However, TP17 specifies that the deduction should focus primarily on personnel expenses.

Furthermore, TP17 recommends that any grant of tax relief on profits arising from the patent box and R&D tax incentive not exceed 70 percent (instead 80 percent) of taxable income. The relief leeway is thus more restrictive than Switzerland’s third series of corporate tax reforms.

Under TP17, the Swiss Confederation will pay the cantons 21.2 percent of direct federal tax revenue instead of 17 percent, as was the case for the CTR III proposal.

Moreover, TP17 will provide for new measures. There will be partial taxation of dividends from qualified participations (minimum stake of 10 percent) at a rate of 70 percent at federal level and at least 70 percent at the cantonal and communal level.

A clause is also foreseen that will take the communes into account in connection with the increase in the cantons’ share of direct federal tax. Moreover, TP17 increases by 30 CHF the minimum amount for child and education allowances; therefore, child allowances will rise to at least CHF 230 and education allowances should be at least CHF 280.

Finally, TP17 does not provide an interest-adjusted profit tax on above-average levels of equity capital like CTR III.

The steering body confirmed an urgent need to swiftly adopt and implement a new corporate tax reform proposal, not only at the national level, but also at cantonal level. In fact, the cantons should disclose their plans for cantonal implementation before the decision on TP17 is made to increase the transparency of the proposal, the steering group said.

To implement the reform, the Federal Council will decide on the parameters in June. Thereafter, the Federal Department of Finance will prepare a consultation draft. The consultation should be completed by December 2017. It is envisaged that the dispatch for the attention of Parliament will be adopted in spring 2018.

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. He can be reached at

Davide Anghileri

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