Corporate taxation in Switzerland remains attractive: The Federal Act on Tax Reform and AHV Financing (TRAF) was comfortably accepted by the Swiss public. The “yes” vote sends a clear signal of cooperation to the EU and the international community. It also does away with allegations of being non-cooperation in tax matters and the risk of ending up on the EU black list.
Switzerland has been on the gray list of the EU since December 2017. This list includes states that have promised cooperation and improvement with regard to tax practices that are no longer accepted and have since been monitored by the EU. Switzerland was obliged to have abolished the five company tax regimes criticized by the EU and OECD by the end of calendar year 2018. However, this was not possible due to the direct democratic process in Switzerland. Instead of putting Switzerland straight on the black list at this point, the EU showed leniency and extended the deadline until the end of 2019.
The now approved Swiss corporate tax reform pursues the abolition of these internationally no longer accepted tax regimes with transitional measures as well as replacement measures. The various measures in the bill and the link with the additional AHV financing have mobilized opponents in several political camps, which is why the outcome of the vote remained uncertain until the end.
Fortunately, the Swiss electorate has opted for the reform, paving the way for an internationally accepted corporate tax regime that strengthens the attractiveness of Switzerland as a tax location and also secures the financing needs of the state. Switzerland has set the stage for future success in international tax competition with the introduction of the patent box, additional deduction for research and development expenses and low corporate tax rates.
The reform is scheduled to enter into force at federal level on 1 January 2020. However, the tax reform will effectively be implemented through the cantonal tax laws. This applies in particular to the cantonal tax rate reductions, which are also part of the reform strategy but not formally part of the federal bill. The cantons can now implement the regulation concerning a temporary special tax rate solution in order to mitigate the de facto tax increase for those companies that wish to waive their cantonal tax status prematurely.
Despite the adoption of the reform at federal level, certain hurdles still have to be overcome at cantonal level. However, the cantons have either already adopted or at least announced the implementation parameters they intend to set for the individual measures.