Corporate Tax Reform III in the Consultation Process

The Federal Council has opened the consultation for Corporate Tax Reform III on 09/22/2014. The aim of the reform is to adapt the Swiss tax system to international developments and to strengthen competitiveness.

Switzerland under the scrutiny of the EU

The Federal Council wants to settle the tax dispute with the EU through Corporate Tax Reform III. Since 2007, a close dialogue has been conducted to adjust the Swiss tax system to the standards of the EU and OECD. Specifically, the tax privileges for foreign earnings enjoyed by holding, domicile, and mixed companies, which have a cantonal tax status, are criticized. To maintain the attractiveness of these jurisdictions for special companies and to prevent relocations, the Federal Council has proposed compensatory measures. These special corporations are of great economic importance as they account for half of all federal corporate tax revenues (3.6 billion CHF) and about one fifth (2 billion CHF) of corporate tax revenues for cantons and municipalities.

Contents of Corporate Tax Reform III

The Federal Council presents various proposals on how the new corporate tax could be structured. To meet the standards of the EU and OECD, the existing tax privileges of holding, domicile, and mixed companies will be abolished. Domestic and foreign corporate profits will be treated equally. The fiscal leeway of the cantons will be maintained, thus allowing the cantons to continue their own site strategies as before. The cantons are free to reduce corporate tax rates, which some cantons have already announced. Further key measures include: