Cantons want to lower corporate taxes

Swiss cantons plan to reduce profit taxes and increase dividend taxes to secure their attractiveness as business locations post-Corporate Tax Reform III.

2016

To maintain the attractiveness of the location after the Corporate Tax Reform III has taken effect, most cantons want to lower their profit tax rates and cover part of the revenue losses by increasing taxation on dividends.

Optimization in the Triangle

As a result of international pressure, more than 20,000 companies with special status (holding and domiciliary companies) in Switzerland will lose their tax privileges due to the Corporate Tax Reform III. To prevent migrations, therefore, many cantons want to lower the general profit taxes. This substitute measure would lead to revenue losses for the treasury, since companies without special status would also benefit from the tax reduction. Consequently, an optimal solution must be found between the goals of keeping tax revenues at a reasonable level, increasing the international acceptance of the Swiss tax system, and preserving the attractiveness of the location.

Profit Tax Rates

The cantons were requested by the Economic Commission of the Council of States in early May to disclose their planned changes concerning profit tax rates as part of the reform package. In 14 cantons, a reduction of tax rates has already been announced – others like Zurich and St. Gallen are likely to follow soon. An average reduction of 3% is expected.

Dividend Taxation

To decrease the revenue losses of the cantons, an increase in the minimal taxation of dividends on large holdings was proposed. Currently, the cantons can still freely decide how high the reduction in the taxation of large holdings should be, which on average is about 50%. According to the proposal, the cantons should only be allowed to tax affected dividends with a reduction of 40%. Thanks to the reduction in profit tax rates, the majority of SMEs should still expect a tax reduction overall, if dividend taxation were to be increased.‍

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