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Switzerland: Changes concerning treatment of principal companies, finance branches

Switzerland: Treatment of principal companies

The Swiss federal tax administration announced that it will no longer apply federal practices concerning principal companies and Swiss finance branches to new companies from 2019.

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This announcement represents a step towards implementation of the tax reform anticipated to be effective beginning on 2020 when these federal practices would also be abolished for existing principal companies and Swiss finance branches.

Status of tax reform

The law package was finally approved by Parliament on 28 September 2018. Signatures are being collected for a referendum vote on the latest tax reform initiative. Currently, the referendum period is running, and citizens may call a public vote on the new law by filing a minimum of 50,000 signatures by 17 January 2019. If requested, the public vote would be held on 19 May 2019. According to the Federal Council, the reform would be effective 1 January 2020. 

The Federal Act on Tax Reform and AHV Financing (TRAF) introduces legislative measures to bring the Swiss corporate tax law in line with international standards. Thereby, cantonal tax status companies (e.g., holding companies or mixed companies) would be abolished, and new measures would be introduced. In this context, the federal practices on tax allocation for principal companies and Swiss finance branches would be abolished (no formal change of the tax law is required in this regard). 

 

Read a November 2018 report prepared by the KPMG member firm in Switzerland

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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