On 3 April 2020, the Federal Council adopted a consultation draft to strengthen the debt capital market in Switzerland and to close a gap in withholding tax protection.
The Federal Council proposes to exempt domestic legal entities and foreign investors from withholding tax on interest investments. This will allow groups of companies to issue their bonds from Switzerland without any withholding tax obstacles. From a technical point of view, this change will involve a partial switch to the so-called paying agent principle. As an accompanying measure, the turnover tax on domestic bonds will also be abolished. A security gap for domestic individuals will be closed by making income from foreign interest investments subject to withholding tax.
The new withholding tax will lead to a one-off reduction in revenue of approximately CHF 750 million. Static additional income of approximately CHF 35 million will result from the closing of the gap. The abolition of the turnover tax on domestic bonds will lead to a shortfall in income of approximately CHF 50 million for the Confederation. In dynamic terms, however, the reform will lead to additional revenues, as bond issues will be made from Switzerland.
The press release and all documents are available here.
