Corporate Tax Reform III parameters

in Tax, 07.04.2015

On Thursday, 2 April 2015, the Swiss Federal Council published its parameters for the dispatch on the Corporate Tax Reform III. The Federal Council clearly stated its strong support for CTR III as necessary to ensure the attractiveness of Switzerland as a business location. Its decision to abandon the idea of introducing a personal capital gains tax is certainly a relief for business. However, the renouncement of the Notional Interest Deduction is a considerable sacrifice.

The business community was taken by surprise on Thursday morning, when the Federal Council announced its parameters to the Corporate Tax Reform III, based on the findings from the consultation procedure. Particularly surprising, was the Council’s statement regarding the clear guidelines that the administration will use to prepare the dispatch to the reform by June 2015.

The relevant facts

In a nutshell, the Federal Council announced that it will abandon the idea of a personal capital gains tax as well as the introduction of a Notional Interest Deduction (NID). Further, the cantons shall have more possibility and flexibility in decreasing their income tax rates, whereby the Federation shall have them participating to a larger extent on the federal income tax. The Federal Council stated a clear commitment to the promotion of R&D, i.e. with the introduction of an Intellectual Property (IP) Box as well as possible input promotions on the cantonal level. Of particular relevance for the shipping industry, the Federal Council will look into the possibility of introducing a tonnage tax regime.  No statement was given regarding the step-up mechanism, however due to its high acceptance during the consultation procedure, we do not foresee that it will be jeopardized.

Other measures

The abolishment of the capital stamp issuance tax is still on the agenda, and from a systematic point of view, it has no direct link to CTR III. The proposed amendments to the participation exemption and the tax loss carry forward rules have been abandoned. Last but not least the Federal Council announced that they would support an increased tax base on dividends from major participations of individuals to 70 percent.

My comments

There is no doubt that tax reform needs to be financed. The introduction of the proposed personal capital gains tax would have created a lot of opposition from a majority of the parliament and it is certainly a relief having abandoned this idea. Waiving the NID at this early stage of the process – before the parliamentary debates have started – may give business the wrong signal. Without the NID, there is no alternative to the finance branch/company tax regime and therefore, finance activities would likely be taxed at ordinary tax rates (in some cantons at least as low as approx. 12 percent overall effective tax rate).

The possible introduction of input promotions (tax credits or super deductions) is a positive signal to R&D intensive industries. Due to the international developments on the IP Box and narrowing scope in connection with the Nexus Approach, this is a step in the right direction, since the actual location of the R&D activities is becoming increasingly relevant.

The introduction of a tonnage tax would not only be important for the relevant shipping industry in Switzerland but could also be a highly effective measure to attract new business into Switzerland. Since it is an internationally accepted mechanism, it can be seen as a sustainable measure.


As indicated, the dispatch and the new draft bill should be published in June 2015 and then debated in parliament. The Federal Council already announced earlier that the Corporate Tax Reform shall enter into force in January 2017. However, due to its political dimension it is highly likely that a referendum will be organized, which will push the entry into force somewhere into 2018/19.



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