On 14 February 2018, the Federal Council adopted a dispatch and a draft law on the calculation of the participation deduction for too-big-to-fail instruments.
According to the media release of 14 February 2018 and the corresponding dispatch on the federal law on the calculation of the participation deduction for too-big-to-fail instruments, banks may have to issue so-called TBTF instruments to strengthen their capital base due to the too-big-to-fail regime (TBTF regime).
As stated in the message, systemically important banks must issue such funds via their group parent company from 2020 at the latest, which will generally pass the funds on within the group. Under current law, this results in a higher income tax burden on investment income for the group parent company concerned, which makes it more difficult to build up equity capital. This is contrary to the objectives of the TBTF legislation.
The bill approved by the Federal Council corrects the calculation of the participation deduction for group parent companies of systemically important banks and thus the potential higher burden in certain areas.
- The interest expense for TBTF instruments should no longer be part of the financing expenses that reduce the participation deduction.
- The funds from TBTF instruments passed on to Group companies should be excluded from the balance sheet of the Group parent company, as they generally increase the participation deduction.
The adjustments proposed by the Federal Council will prevent a potential tax increase due to supervisory law.
The press release with the following supplements is available here.
