After confirming the schedule of the Tax Proposal 17, the Federal Council has now set the parameters for the dispatch. Based on the results of the consultation procedure, the Federal Council has decided – despite controversial statements – to mainly maintain the proposal as issued for consultation. Details of the final proposal within the dispatch are expected at the end of March 2018.
No major content changes in the reform proposal
According to the decision on the parameters, the Federal Council’s final law proposal according to the dispatch will be quite similar to the draft submitted for consultation. The relevant change is that Tax Proposal 17 shall provide for an increase in the cantonal share of the direct federal tax income from currently 17% to 21.2% (instead of 20.5%) as requested by the cantons. The main elements of the reform shall still be:
- Abolishment of the status companies at cantonal level as well as certain tax practices at federal level including transitional measures
- Introduction of a mandatory patent box regime at cantonal level
- Introduction of an optional R&D super deduction at cantonal level
- Higher taxation (of 70%/at least 70%) of dividends for qualifying shareholdings of individuals
- Increase in child and education allowance by CHF 30 per month
- Introduction of an overall tax relief limitation to 70% of all tax measures at cantonal level
- Option to reduce the calculation of capital taxes on equity relating to participations as well as patents and similar rights
- Possibility to disclose hidden reserves including goodwill (step-up) in case of relocation to Switzerland
No notional interest deduction on shareholders’ equity – for now
Despite specific requests to provide the cantons with an option to introduce a notional interest deduction on excessive shareholders’ equity (driven in particular by the canton and city of Zurich), the Federal Council has refrained from including such a measure into the parameters for the dispatch. Hence, the expected reduction in the cantonal tax rates may become even more important. The absence of such a deduction is mainly due to considerations to balance the law proposal and consider the result of the public vote on the Corporate Tax Reform III. It remains to be seen whether Parliament will take this point up again during parliamentary deliberations.
Ambitious schedule on track
Further details on the above measures will be provided within the dispatch due for publication at the end of March 2018. Parliament shall make its final decision in fall 2018. If no referendum is called, the first measures (elements of a more technical nature) could come into force at the start of 2019 and the main part of the reform by 2020. This timetable is ambitious but shows that the reform is seen as highly urgent due to ongoing and recent international pressure and changes in the international landscape.
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