Thursday, 14 April 2016

Switzerland: House of Representatives modifies proposals for Corporate Tax Reform III

The Swiss House of Representatives voted to approve the Corporate Tax Reform III (CTR III) on 16 and 17 March 2016, including some modifications to the draft legislation introduced into parliament on 5 June 2015 (for prior coverage, see Switzerland tax alert, 8 June 2015). The main objective of the CTR III is to align Swiss tax law with international standards (including developments under the OECD base erosion and profit shifting (BEPS) initiative) and enhance Switzerland’s attractiveness as a location for multinational companies.

Among other items, the House of Representatives voted in favor of the following measures to compensate for the abolition of the special corporate income tax regimes (e.g. the mixed, domiciliary, holding and principal company regimes, as well as the Swiss finance branch regime) that the CTR III would phase out:

  • Introduction of a notional interest deduction (NID) at the federal level – and at the cantonal/communal level, at the discretion of the individual cantons;
  • Introduction of a patent box at the cantonal level, with an option for the cantons to offer full tax relief for qualifying income;
  • Introduction of R&D incentives at the cantonal level in the form of excess R&D deductions (super deductions) for qualifying R&D expenditure, which would include foreign R&D activities; the super deduction would not be limited to 150% of expenditure, but would be set at the discretion of the cantons;
  • Allowance of the tax-privileged release of hidden reserves for cantonal/communal tax purposes for companies transitioning out of tax-privileged regimes, and a step-up for direct federal and cantonal/communal tax purposes upon the migration of companies or activities to Switzerland;
  • Reduction of the annual capital tax on participations, patented intellectual property and intragroup loans; and
  • Introduction of a tonnage tax for maritime shipping companies.
Source & more info: Deloitte