A referendum on Switzerland's proposed new corporate tax system, known as Tax Proposal 17, is to be held on 19 May 2019, with a view to bringing the law into force on 1 January 2020. TheFederal Act on Tax Reform and AHV Financing will repeal the country's existing special corporate tax regimes in an effort to keep Switzerland off the European Union's blacklist, which will include jurisdictions that offer preferential rates to foreign companies as well as jurisdictions that practice tax secrecy. Proposal 17's predecessor was rejected in a national referendum in February 2017.
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On 7 June 2018, the Swiss Senate passed the revised so-called Swiss Corporate Tax Reform 17 bill following the recommendations of its Ways and Means Committee. The approved version by the Swiss Senate contains the following elements:
Abolishment of all Swiss special income tax regimes
All special Swiss income tax regimes, such as the mixed company or holding company regimes, will be replaced with measures that are both internationally accepted and that ensure Switzerland will remain attractive for multinational companies.
Reduction of the general tax rates at the discretion of the individual cantons, where the majority of cantons will be in the 13 – 14 % tax rate range (effective combined federal/cantonal/communal tax rate, ETR) with some cantons with an ETR as low as 12%, such as Zug, Schwyz or Lucerne.
Introduction of a Patent Box, which is following the so-called modified nexus approach by the OECD on a cantonal level with a tax relief for qualifying income of up to 90%. The proposed law allows for flexibility with regard to outsourced functions and covers Swiss and foreign patents as well as patent equivalent rights.
Introduction of R&D super-deduction at the cantonal level up to a maximum of 150% of the effective qualifying expenses. The reform provides for a wide application of R&D activities that may benefit, including basic research as well as scientific application and knowledge based R&D.
Tax privileged release of reserves for companies transitioning out of tax privileged regimes: Companies transitioning out of tax privileged cantonal tax regimes into ordinary taxation (such as mixed and holding companies) could release hidden reserves (including self-created goodwill) in a tax privileged manner for cantonal/communal tax purposes within a period of five years, whereby no deferred tax assets should have to be set up for IFRS or U.S. GAAP purposes. This should enable companies to more or less maintain their existing level of taxation for another five years after the sunset of the regimes in 2019 or 2020.
Step-up upon migration of a company or of activities and functions to Switzerland: A step-up would be allowed for direct federal and cantonal/communal tax purposes (including on self-created goodwill) for companies or additional activities and functions migrating to Switzerland.
Reduction of the cantonal/communal annual capital tax in relation to intercompany loans and patented intellectual property at the discretion of the individual cantons. As opposed to the previous version, cantons can now also apply a reduced capital tax rate on relation to intercompany loans.
Cantons with a “high” cantonal tax rate may introduce a notional interest deduction (NID) on a cantonal level. This may only benefit the canton of Zurich and potentially very few selective cantons with high enough tax rates.
Revenue raising measures
The bill contains the following revenue raising measures:
Listed companies, when repaying qualified capital contribution reserves (which can be repaid tax free), must now at least pay an equal amount in dividends (which are subject to withholding tax and taxable for the Swiss resident individual shareholders). Not affected by this rule are intra-group repayments of capital contribution reserves or capital contribution reserves repaid by privately held companies.
The partial taxation of dividends for qualifying Swiss shareholders is increased to 70% at a federal level, respectively to at least 50% at a cantonal level. (The previous version required a minimum taxation of 70% at a cantonal level).
Further, the tax reform will be combined with Swiss Social Security reform, with an increase of social security contributions by employees and employers as well as reattribution of existing VAT-revenue to the social security scheme. Social security contributions will be increased by 0.3% of salaries, equally shared by employer and employees.
The Swiss House of Representatives is expected to vote on the legislation in its autumn 2018 session. The generally more pro-business Swiss House of Representatives might introduce marginal amendments to further increase the attractiveness of the reform. The final reform is expected to pass by September 2018.
In case there is no referendum, some elements of the tax reform, such as the sunsetting of existing regimes with respective transition measures could become effective as soon as in the first quarter of 2019, with the bulk of the reform being effective as early as 1 January 2021.
Attractiveness of the reform
The tax reform 17 bill as approved by the Swiss Senate represents a well-balanced and internationally competitive solution that would ensure that Switzerland stays an attractive location for multinationals and domestic companies alike, while at the same time providing an internationally aligned tax system that is in conformity with international standards, such as OECD BEPS and others.
SIX, the owner and operator of the Swiss stock exchange, is launching a new fully-regulated crypto exchange.
The move comes despite a slump in prices and volumes in crypto since the start of the year.
“It is abundantly clear that much of what is going on in the digital space is here to stay,” CEO Jos Dijsselhof said.
SIX, the company that owns and operates the Swiss stock exchange, on Friday announced plans to launch a fully regulated cryptocurrency exchange, showing continued institutional interest in the space despite declining prices.
The new SIX Digital Exchange will be overseen by the Swiss national bank and Swiss regulator FINMA, the company said.Switzerland has been one of the most crypto-friendly jurisdictions in Europe, with regulators offering clear guidance on how they expect crypto companies to operate.
SIX’s decision to launch a crypto exchange comes despite a collapse in the value of cryptocurrencies and declining volumes since the start of the year. Bitcoin, the largest crypto asset by market value, collapsed from around $US20,000 per token at the start of the year to just over $US6,600 on Thursday.
“This is the beginning of a new era for capital markets infrastructures,” Jos Dijsselhof, the CEO of SIX said in a statement. “For us, it is abundantly clear that much of what is going on in the digital space is here to stay and will define the future of our industry.”
Investors and entrepreneurs in the space say that institutional investors are preparing the infrastructure needed to enter the space, setting up trading accounts and custody solution behind closed doors. One described the flurry of activity they are seeing as “preparing for September” to BI – referring to a month typically associated with high post-summer trading volumes in the investment world.
SIX’s new platform, set to launch in the first half of next year, will offer end-to-end trading, settlement, and custody service for digital assets such as bitcoin and ICO tokens.
Thomas Zeeb, head of securities & exchanges at SIX, said in a statement: “The digital space currently faces a number of key challenges. These include the absence of regulation that ensures official safety, security, stability, transparency and accountability – all of which contribute to a lack of trust.”
Zeeb highlighted digital asset custody – who looks after your tokens – as a key issue in the space and said SIX would solve this issue through its role as “a recognised and regulated infrastructure provider who provides all steps of the chain in an integrated and secure model.”
Business Insider recently highlighted the problem of custody as a key barrier for venture capitalists and other institutional investors looking to get into crypto.
Separately on Thursday, US crypto exchange operator Bittrex announced a joint venture with Invest.com to build a new crypto trading platform in the EU. Itai Avneri, Invest.com’s spokesman, said in a statement: “Our goal is to become the most reputable platform in the EU and later in numerous countries across the globe.”
Source Business Insider Australia