On 12 September, the National Council approved tax proposal 17 (TP17). The Council of States adopted a similar text on the plans as the National Council, albeit with some differences.
The Federal Council has introduced the abolition of special arrangements for cantonal status firms, with the aim of ensuring that these companies will pay more tax. The change is seen as crucial to preventing Switzerland from being put on the EU’s blacklist, as this regime is viewed as harmful, allowing companies to benefit from considerably lower corporate income tax rates.
The package is also going to enable cantons to propose patent box regimes, to provide companies concessionary tax treatment for revenue from intellectual property development undertaken in their jurisdiction.
The CTR III was intended to readjust the Swiss tax system to international standards. Especially, preferential tax regimes (holding, domiciliary, and mixed company regimes) looked at as harmful tax practices, are to be eliminated to avoid adverse counter-measures by the EU. Also, The Corporate Tax Return III contained new legal provisions, fit with international standards, which were intended to provide an engaging tax environment to businesses.
TP 17 bill intends to introduced mandatory patent box regime on a cantonal level.
As an outcome, tax relief of up to 90percent will be available for profits occurring from patents or equal rights (such as supplementary protection certificates or semi-conductor topographies).
To increase Switzerland’s position as an innovative nation, the Swiss Federal Council considers it proper that computer-implemented innovations may as well qualify for the Swiss patent box.
The profits resulting from patents and equal rights shall be determined according to the residual method.
Additionally, the bill authorizes the cantons to carry out an R&D super-deduction of up to an additional 50% of business-related costs for R&D activities performed in Switzerland.
The tax relief from the patent box and the R&D super-deduction is capped at 70 percent of the taxable revenue before offsetting any net running losses of the Swiss legal entity. It is critical to mention that Swiss cantons announced their intention to reduce their effective tax rates.
This should be inexpensive because the cantonal share of federal income tax will be raised from 17 percent to 21.5 percent. Approximately, the ETR for all businesses will be around 14%, wherein some cantons there will be an effective tax rate of about 12% (of federal, cantonal and municipal taxes).
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