As expected the federal council has quickly launched a new tax submission to be able to abolish the special tax regimes criticised by the European Union at the agreed upon deadline.
The cornerstones stay untouched
The raise of the share the cantons will receive out of the federal tax revenues (from 17 % to 21.2 %) is still fully agreed. Restrictions will be made with the Patent box, the taxation of dividend income and the cost deduction of R&D expenses
Critical points deactivated
As expected the interest adjusted revenue tax on shareholder’s equity above average has been dropped. This was the most discussed and least understood point in the CTR III. For the other points at stake compromise proposals were made, that should have a good chance in parliament as well as in a public vote (if a referendum is taken again).
Additional F&E deductions are limited
The deductions for F&E costs stay at a maximum of 50 % but they are more or less limited to payroll expenses. Other kinds of cost can only be claim on a limited basis.
Limited discharge within the patent box
Whereas the discharge limit of the patent box was at 80 % in the CTR III it has now been reduced to 70 % in the new tax submission.
Raise in the taxation of the dividend income
The taxation of dividends will be raised on federal and cantonal level from the 60 % that were foreseen in the CTR III to now 70 %. The cantons are not free in their dividend taxation but must tax dividend at least with 70 %
Transition rules are dropped
As the federal council expects to have the submission ready by March 2018 and the parliament the will debate it in its session of summer and autumn 2018, the new tax submission could grow in power on January 1, 2019 – which is the deadline Switzerland granted the EU. Therefor no transition rules or periods are possible.
A bait for the tax payers
The steering committee suggest that the family allowance shall be raised by CHF 30 per month. The family or education allowance would then be at least CHF 230 to 280. At least, because these allowances in the cantons with the lowest amounts are at CHF 200 and 250 now.
And in the state of Zug?
The state of Zug plans – due to the higher refund of federal tax revenue – to reduce its corporate taxes from 14.6 % to approximately 12 %. At the same time a patentbox shall be introduced with a discharge possibility of 90 %. The federal rules concerning R&D cost will be adopted on a one to one basis. The taxation of dividend income will (must!) be raised from 50 % to 70 %. At the same time, all privileged tax regimes will be abolished. The family allowance will be raised from CHF 300 to 330 per month. The government of the state of Zug expects to implement these changes in 2020, as the canton has to wait for the final decision on federal is happy level.
Potential for tax consulting
As the cornerstones and the planned parameters are known, evaluations and decision based on these parameters can be analysed and estimates can be made concerning future tax decisions. We would be most happy to help you with such tax optimisation schemes.
As always in Switzerland a compromise acceptable to all shall be reached. The new tax submission has a very good chance to pass through parliament. Our tax expert Christian Lingg is happy to help you along.