On 10 February 2019, the Basel-Stadt electorate voted by a large majority of 78.8% to adopt the “Basel compromise on tax proposal 17”. The canton is proactively implementing the harmonization provisions of the Federal Act on Tax Reform and AHV Financing (TRAF). The enactment will be voted on throughout Switzerland on 19 May 2019.
As the first German-speaking canton and pillar of the Life Science industry, Basel-Stadt is creating the basis for competitive, OECD-compliant, and legally certain taxation for companies domiciled in the canton.
New corporate taxation in Basel-Stadt
- Effective corporate income tax rate at the federal and cantonal levels incl. municipalities: 13.04% (previously: 22.18%);
- Capital tax rate of 0.1% (previously: 0.525%); taxable equity capital attributable to qualifying participations and patents qualifying for the patent box is indirectly exempted at 80%;
- Abolition of tax privileges (holding / management companies / mixed companies);
- Regarding a transfer to the ordinary tax status, hidden reserves and self-generated goodwill could be separately taxed at a special rate of 3% within 5 years. Loss carryforwards can be used within the scope of the taxable quota at the time they arose;
- Introduction of the Patent box; the net profit from patents and comparable rights can be included in the calculation of the taxable net profit per patent or comparable right (so-called nexus ratio) with a reduction of 90% in the ratio of the qualifying to the total research and development expenditure per patent or comparable right;
- Relief limit at 60% of taxable net income (excl. investment income and loss offsetting);
- Partial taxation of dividend income at 80% (previously: 50%);
- Minimum participation rate of 5% in the case of transposition (Transponierung) is no longer applicable;
- Provisional takeover of foreign losses incurred by permanent establishments (analogous to federal corporate income tax law);
Enactment and transitional phase 2019
The date of entry into force will be communicated shortly by the Government Council. It remains to be seen which law will be applicable in the transition phase 2019 until the STAF bill would come into force at federal level.
Since the STAF bill and the mandatory new harmonization law would enter into force on 1 January 2020 at the earliest, Basel-Stadt will have to continue to grant tax privileges still in force during the 2019 calendar year. For the same reason, the patent box and the abolition of the minimum quota for transposition of 5% in Basel-Stadt will presumably not come into force before 1 January 2020. Consequently, the increase in partial dividend income taxation to 80% should most likely not come into force until 1 January 2020 at the earliest.
There are further certain indications that the Government Council already plans for 2019 to lower the corporate income tax rate as described above as well as to put into force the separate taxation of hidden reserves and goodwill. This would provide resident and currently privileged companies the (attractive) opportunity to switch to OECD-compliant taxation already in 2019.
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