At its meeting on 27 September 2019, the Federal Council adopted further key figures for the reform of withholding tax. The consultation process is scheduled to open in the first quarter of 2020.
The withholding tax reform aims to strengthen the Swiss debt capital market by exempting domestic legal entities and foreign investors from withholding tax on Swiss interest rate investments. In order to secure tax revenues, on the other hand, withholding tax is to be levied on all interest investments by domestic natural persons, and now also on foreign ones.
On 26 June 2019, the Federal Council of Germany adopted the key parameters for the reform of the withholding tax (see our contribution of 29 June 2019). Now these central benchmarks are being supplemented with further benchmarks:
- Withholding tax is also to be levied on indirect interest investments. This applies to domestic and foreign collective investment schemes, regardless of whether they distribute or reinvest their income.
- Any applicable exemption limits for bank interest must be maintained. Additional allowances are not to be granted.
- The participation deduction should not be adjusted. However, the measure should be set out in the consultation draft.
- The turnover tax on domestic bonds should be abolished.
The proposed reform will lead to an estimated CHF 250 million in annual revenue shortfall. On the other hand, there are additional revenues due to positive dynamic effects from the strengthening of the business location and the hedging purpose. The cost-benefit ratio is advantageous in the long term.
The press release is available here.
