The canton of Vaud plans to significantly cut its corporate tax rates. Not only will this boost the canton’s competitiveness, it will also propel it up the rankings of the most attractive business locations - both nationally and internationally. There is still some work to do with respect to tax rates for individuals, on the other hand. These are some of the insights provided by this year’s installment of the Vaud Tax Monitor published by KPMG and CVCI.
The "Vaud Tax Monitor" is a joint publication by KPMG and the Chamber of Commerce and Industry of Vaud (Chambre vaudoise du commerce et de l’industrie; CVCI) which examines the tax attractiveness of the canton of Vaud for both legal entities and individuals again this year.
Standard corporate tax rates in this canton are currently among the highest in Switzerland. This is set to change radically in 2019 following the cantonal implementation of the Federal Act on Tax Reform and AHV Financing (TRAF).
The Canton of Vaud was quick to recognize the importance of corporate tax reform. Vaud’s electorate first voted in favor of a cantonal corporate tax reform on 20 March 2016, approving a substantial reduction in the canton’s corporate tax rate from 21.37% to 13.79%. In doing so, Vaud laid the foundations for the favorable conditions required to maintain its attractiveness as a location.
Janick Pochon, Head of Corporate Tax at KPMG Lausanne, highlights the importance of the referendum: “This decision has shown how determined the people of Vaud are to keep their canton attractive by adopting a model that is sure to inspire reform at federal level as well as the other cantons.” Vaud was the first canton in Switzerland to actually transpose its national corporate tax reform strategy into cantonal legislation. With its future standard corporate tax rate of 13.79%, Vaud will move into a very favorable position as a business location, both in national and international comparisons.
“In terms of individual taxation, Vaud imposes very high rates on its taxpayers – compared with the other cantons – and this holds true for most income groups,” explains Vincent Thalmann, Head of Corporate Tax at KPMG in Western Switzerland. Vaud’s maximum individual tax rate of 41.50% makes it one of the cantons with the highest tax burden for the middle to upper income brackets. Only Geneva and Basel-Land have higher peak tax rates for individuals. 6% of Vaud’s taxpayers have an annual income in excess of CHF 150,000 and contribute more than 41% of the canton’s tax revenue.
The canton of Vaud also comes in last in Switzerland in terms of its wealth tax rate. For high-income taxpayers, the tax burden in Vaud is six times higher than in the cantons with the lowest wealth tax rates. Only the canton of Fribourg levies a higher tax rate on private assets of between CHF 150,000 and CHF 500,000.
The “Vaud Tax Monitor”, which is published every two years, is a systematic, intercantonal comparison of the tax attractiveness of the canton of Vaud, particularly with regard to neighboring cantons. It analyzes the canton’s attractiveness in terms of corporate taxation and its positioning on individual taxation. The Vaud Tax Monitor is produced jointly by KPMG and the Chamber of Commerce and Industry of Vaud (Chambre Vaudoise du Commerce et de l’Industrie; CVCI).
Media Conference - Slides (PDF, in French)
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