17 June 2016, the Swiss Parliament approved the final bill on Corporate Tax Reform III by removing certain preferential tax regimes and introducing competitive replacement measures.
The reform would phase out all special corporate tax regimes, such as the mixed, domiciliary, holding and principal company regimes, as well as the Swiss finance branch regime. Federal and cantonal tax holidays would not be affected by the reform and would continue to be granted.
A number of measures are included to compensate for the phase out, which include:
- Introduction of a patent box regime.
- Introduction, at the discretion of the individual cantons, of an increased tax deduction for research and development expenses.
- Introduction of a notional interest deduction (NID) regime on surplus equity. The introduction is mandatory at the federal level and optional at the cantonal level.
- Reduction of the cantonal/communal annual net wealth tax in relation to the holding of participations and of patented IP, at the discretion of the individual cantons.
- Allowance of a step-up for direct federal and cantonal/communal tax purposes upon the migration of a company or of additional activities and functions to Switzerland.
- Allowance of the tax-privileged release of hidden reserves for cantonal/communal tax purposes for companies transitioning out of tax-privileged cantonal tax regimes into ordinary taxation;
To boost the attractiveness of Switzerland as a business location and to compensate the abolition of the cantonal tax regimes, most cantons are expected to lower their ordinary corporate tax rates. In order to compensate for the anticipated losses in revenues, the share of the cantons in the direct federal tax revenue will be increased from 17% to 21.2%.
The final bill is subject to an optional referendum. The target date for the entry into force of the reform package is currently 1 January 2019.