Federal law on tax reform and AHV financing

Bucher Tax AG was a guest at the "Tax Snack" presented by the "Center for Swiss and International Taxation" (zsis) on April 25, 2019. Check out our video about the TRAF-proposal on their platform. Enjoy!

From USR III to Steuervorlage17 / TRAF

Since the 2000s, the international community of states has set itself the goal of achieving more optimal coordination in the area of taxation and preventing tax loopholes. The tax regimes of the states have been widely reviewed and black and grey lists of states with frowned-upon tax practices have been drawn up. Switzerland was also told during the review that some of its rules should be revised. The focus of international criticism is the privileged taxation of the so-called status companies - these are the holding companies, domiciliary and management companies and the mixed companies.

In response to the rebuke from the international community, a bill to correct the tax regulations was drafted and submitted to the people for a vote in the form of the "Corporate Tax Reform III" on February 17, 2017. After the fierce voting campaign, the verdict of the people was "No". However, the reaction of the Federal Council shortly after the vote was clear: Due to the continuing pressure from the international community, there is an ongoing need for reform to abolish the privileged taxation of status companies. A new bill was tackled - Tax Bill 17, later renamed "Federal Law on Tax Reform and AHV Financing", in short TRAF.

Objectives of the Steuervorlage17 / TRAF

Despite the abolition of status companies, the legislator wants to continue to maintain the attractiveness of Switzerland as a business location for globally active companies. In addition to tax measures such as the patent box and the special depreciation for research and development, this will primarily be achieved by lowering the profit tax rates in the cantons. The aim is to prevent the affected companies from relocating. However, the aim of Tax Bill 17 / TRAF is also that the loss of tax substrate for the three levels of government, but above all for the cantons and municipalities, should be kept as small as possible.

Content of the Steuervorlage17 / TRAF

The elements of Tax Bill 17 can be divided into three groups: the elements for maintaining attractiveness, the elements for financial compensation, which are intended to enable a fiscal balancing of the effects, and additional individual measures.

The first group includes the following aspects:

• Special regulation for the transfer of hidden reserves in the case of status companies
• Introduction of the patent box
• Special deduction for research and development costs
• Deduction for interest on equity

The second group of financial compensation measures then includes

• Relief limitation of the special schemes to a maximum of 70%
• Increase in taxes on dividends
• Increase in the cantonal share of direct federal taxation

The third group includes:

• Adaptation of the capital contribution principle

An element that is completely unrelated to the old draft CTR III is the AHV financing as a further (social) equalisation measure.