The report of Q&As and other statements are limited to changes in the tax law with respect to corporate taxpayers and income taxes, and the Q&As caution that they do not include other changes or topics outside of IFRS and income taxes for corporate taxpayers. However, similar considerations may be applied under Swiss GAAP FER, according to the Q&As.

Read the Q&As provided by EXPERTsuisse [PDF 180 KB] (released 5 July 2019)

According to a KPMG report, there are three important areas from the Q&As to consider:

• Substantial enactment. The federal reform is substantially enacted as of 19 May 2019 for IFRS. However, because the tax reform needs to be adopted by the cantons in cantonal tax laws, the legislative procedures of both the federal and cantonal reforms must be substantively completed to be seen as substantially enacted for IFRS purposes. Consequently, relevant substantive enactment is the date of the final decision on cantonal reform (i.e., public vote or expiry of the deadline for calling a referendum). The enactment of the cantonal income tax law results very often in reduced applicable tax rates and therefore re-measurement of deferred taxes.
• Repeal of special tax regimes transitional measures (e.g., mixed and holding companies). TRAF provides for two transitional measures on cantonal level, the (current law) step-up and the dual rate approach. If a company applies the step-up mechanism, this reflects a change in the tax base and therefore affects the temporary differences of a company by either creating a deductible temporary difference or reducing existing taxable temporary differences. Consequently, the step-up results in a deferred tax asset at the future ordinary tax rate or decreases a pre-existing deferred tax liability. The recognition of a deferred tax asset remains subject to the general analysis of recoverability. If the dual rate approach is applied, the tax base will not be impacted and consequently this measure does not impact the temporary differences. The dual rate approach can result in a reduced tax rate for temporary differences reversing in the next five years.
• Other measures. The benefits of the other measures—in particular the R&D incentive, notional interest deduction, and patent box—are to be treated as a reconciling item.

Read a July 2019 report prepared by the KPMG member firm in Switzerland

Swiss voters on 19 May 2019 approved the TRAF confirming the reform of corporate taxation in Switzerland. The tax reform generally focuses on legal certainty and investor confidence and pursues the following three objectives:

• Safeguarding the tax competitiveness of Switzerland as a business location
• Promoting the international acceptance of Switzerland’s corporate tax legislation
• Ensuring sufficient tax revenues to finance public activities

The reform has several consequences including a change of the Swiss Cantonal and Communal Income Tax Harmonization Act (CCITHA) which defines a general framework providing mandatory and / or voluntary guidance on provisions in the cantonal tax laws for income and capital taxes.

The changed CCITHA is scheduled to be effective at federal level on 1 January 2020.

To the extent that the tax reform measures relate to cantonal and communal income tax law changes, the measures will effectively be implemented through modification of the cantonal tax law. In addition to the changes resulting from the CCITHA, many cantons are also expected to lower their statutory income tax rates. Among the tax measures available for the cantons to implement either voluntarily or mandatorily within TRAF are the following:

• Repeal of special tax regimes—mandatory.
• Transitional measures to consider the treatment of hidden reserves including “goodwill” (dual rate approach)—mandatory. Cantons can set both the ordinary rate and the separate rate.
• Additional deduction for qualifying research and development (R&D) (up to 50%)—optional.
• Patent box, tax exemption of up to 90% of qualifying income—mandatory. Cantons can choose the exemption rate to apply, up to the 90% maximum.
• Notional interest deduction on equity (only applicable for cantons with high tax rates such as Zurich).
• Overall limitation of certain measures on cantonal level. The benefits from certain measures are limited to 70% (or less, at the choice of the canton) in order to provide for minimal taxation.

Read more about tax reform on the website of the KPMG member firm in Switzerland.