At its meeting on 6 September 2017, the Federal Council opened the consultation process on tax proposal 17 (SV17).

As a result of the rejection of the Corporate Tax Reform III (USR III) in the referendum of 12 February 2017, the Federal Council submitted a new edition of the project in the form of Tax Bill 17 and published the text of the law on Tax Bill 17 and the explanatory report on the consultation procedure together with a media release.

Together with the bill, the Federal Council is also sending two ordinances for consultation:

The Federal Department of Finance (FDF) intends to submit the dispatch to the Federal Council for the attention of parliament in spring 2018. This means that the SV17 will not come into force before 2020 at the earliest (or, if necessary, gradually).

In accordance with the Federal Council's media release of 6 September 2017, the new proposal contains important adjustments and thus takes account of the result of the vote. In particular, the federal budget should be less burdened and the interests of the cities and municipalities should be taken more into account.

As businesses continue to benefit from a competitive tax environment, it is envisaged that both entrepreneurs and businesses will contribute to the counter-financing of the reform:

  • the entrepreneurs by means of increased taxation of dividends
  • the companies by means of increased family allowances.

According to the overview of the Federal Council, the SV17 contains the following central measures:

  • Abolition of regulations for cantonal status companies (Confederation: no / cantons: mandatory): At cantonal level, status companies pay no or only reduced profit tax. With the SV17 this privilege is abolished. Overtaxation is avoided by means of a temporary special rate solution.
  • Patent box (Confederation: no / cantons obligatory): The profit from patents and comparable rights is separated from other profit and taxed at a lower rate. The discharge may not exceed 90%. The design is based on the applicable international standards.
  • Additional deductions for research and development (Confederation: no / cantons: optional): Additional deductions of up to 50% can be made for research and development. The measure is aimed at domestic research and development. The relevant expenses are personnel expenses plus a flat-rate surcharge or 80% of the expenses invoiced by third parties for contract research.
  • Relief limitation (Confederation: no / cantons: mandatory): The tax relief due to the Patent Box and the additional deductions for research and development may not exceed 70% of taxable profit. The calculation also includes depreciation due to previous taxation as a status company (step-up).
  • Increase in the cantonal share of direct federal tax: The cantonal share is increased from 17% to 20.5%.
  • Consideration of cities and municipalities: The cantons must give appropriate consideration to the cities and municipalities in connection with the increase in the cantonal share.
  • Increase in the federal government's minimum requirements for family allowances: The minimum requirements for family allowances will be increased by CHF 30.

The Federal Council cites the following measures as additional measures:

  • Adjustments to capital tax (Confederation: no / cantons: optional): The cantons may include equity capital in connection with participations as well as patents and comparable rights at a reduced rate in the calculation of capital tax.
  • Disclosure of hidden reserves (Confederation: yes / cantons: mandatory): Companies that relocate their headquarters to Switzerland can benefit from additional depreciation in the first few years (step-up). In the event of the transfer of the registered office abroad, an exit tax will be due as is already the case today.
  • Adjustments to transposition (Confederation: yes / cantons: mandatory): This measure closes a tax gap by limiting the scope of application of tax-free capital gains and thus indirectly also the effects of the capital contribution principle.
  • Extension of the lump-sum tax credit (Confederation: yes / cantons: mandatory): Swiss permanent establishments of foreign companies will now also be entitled to the lump-sum tax credit (implementation of Motion Pelli).
  • Adjustments in financial equalisation: In order to avoid distortions between the cantons, the financial equalisation system will be adapted to the new tax policy realities.

All information and documents are available here. The above summary essentially corresponds to the wording of the Federal Council's press release.

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Tax topics covered in this post:
Income Tax
Profit Tax