TAX UPDATE Geneva, January 29, 2015 1
AGENDA 1. International and Swiss Corporate tax policy 2. Base Erosion and Profit Shifting 3. Swiss Corporate Tax Reform III 4. Automatic exchange of information 5. Individual tax overview 6. Various topics Lausanne, le 22 janvier 2 2015
01 INTERNATIONAL AND SWISS CORPORATE TAX POLICY 3 April 2013
SWISS AND INTERNATIONAL CORPORATE TAX POLICY INTERNATIONAL TAX PERSPECTIVES INTERNATIONAL TAX PERSPECTIVES SWISS CORPORATE TAX REFORM III SWISS CORPORATE TAX REFORM III EU Tax Dialogue Abolishment of privileged corporate tax rulings: Holding Company (cantonal privilege) Agreement signed in October 2014: Auxiliary or Mixed Company (cantonal privilege) Domiciliary Company (cantonal privilege) Switzerland will abolish the privileged tax regimes which distort trade competition Principal Company EU give up reprisals against Switzerland Finance Branch OECD actions Reduction of cantonal corporate income tax rates where necessary to maintain competitiveness The Forum on Harmful Tax Practices issued a list of criteria to determine when a tax regime is Introduction of new tax regimes which comply with potentially harmful international standards The Base Erosion and Profit Shifting (BEPS) Additional tax measures aiming to strengthen actions plan was issued in July 2013 Switzerland attractiveness 4 Date
BASE EROSION AND PROFIT SHIFTING April 2013 02 5
BEPS IN FEW WORDS BEPS aims to : 1. Tax profits where the effective business activity takes 1. Tax profits where the effective business activity takes place place 2. Put an end in aggressive tax planning 2. Put an end in aggressive tax planning 3. Avoid any international double non-taxation 3. Avoid any international double non-taxation Lausanne, le 22 janvier 6 2015
BEPS REPORTS : CALENDAR N° Action Deliverables Timing Next steps 1 Tax challenges of the Digital Economy Final report Sept. 16, 2014 Further analysis re the interaction with other parts of the Action Plan BEPS 2 Tax effects of Arrangements Hybrid Report with draft Sept. 16, 2014 Drafting of guidance re the implementation of the Mismatch recommendations rules in domestic tax law 3 CFC rules Discussion draft Early April 2015 Final report announced by September 2015 4 Base erosion via interest deductions and Discussion draft Until 6 Feb 2015 Final report announced by September 2015 other financial payments 5 Harmful Tax practices Interim Report Sept. 16, 2014 Review of the preferential tax regimes in light of substance and transparency 6 Treaty abuse Report with draft Sept. 16, 2014 Further analysis re the interaction with other parts recommendations of the Action Plan BEPS 7 PE status Public consultation Closed Final report announced by September 2015 8 Transfer Pricing - Intangibles Report with draft Sept. 16, 2014 Further analysis re the interaction with other parts recommendations of the Action Plan BEPS 9 Transfer Pricing – Risks and capital Discussion draft Until 6 Feb 2015 Final report announced by September 2015 10 Transfer Pricing - Other High-risk Discussion draft Until 6 Feb 2015 Final report announced by September 2015 transaction 11 Analysis of data derived from BEPS Discussion draft Late Jan 2015 Final report announced by September 2015 12 Disclosure of aggressive tax planning Discussion draft Late March 2015 Final report announced by September 2015 13 Transfer Pricing – Documentation Report with draft Sept. 16, 2014 Further analysis re confidentiality of the recommendations information and CbC reporting 14 Dispute resolution mechanism Public consultation Closed on 23 Jan 2015 Final report announced by September 2015 15 Multilateral Instrument Final report Sept. 16, 2014 Negotiation with OECD and G20 countries 7 Date
03 SWISS CORPORATE TAX REFORM III Lausanne, le 22 janvier 8 2015
SWISS CORPORATE TAX REFORM III Summary of ETR by canton Cantons Current CIT Announced CIT Current cantonal status Fribourg 19.60 % 13.72 % Announced in December 2014 Genève 24.17 % 13 % Official announcement by the Geneva Council Progressive reduction of the legal tax rate. Additional reduction Jura 21.02 % 19.7 % foreseeable. Luzern 12.3% N/A 11.3% in the lowest taxed community Neuchâtel 18.37 % 15.6% Progressive reduction Nidwalden 12.7% N/A Current ETR under 15% Obwalden 12.7% N/A Current ETR under 15% Schwyz 11.7% N/A Communities of Freienbach/Wollerau Valais 20.76 % 14 % - 16 % Ongoing discussions in 2015. Official announcement by the Vaud Council : 13.79% since 2020. Vaud 23.48 % 13.79 % Progressive reduction. Zug 14.6% 12% Announced Zurich 21.15% 14% - 16% Ongoing discussions in 2015 9 Date
SWISS CORPORATE TAX REFORM III New regimes for mobile income License box (IP box) Notional interest deduction (NID) Reduction of tax burden for certain IP income Tax deduction based on assets as per balance sheet (all companies) Income from domestic and from foreign source are equally treated Income from domestic and from foreign source are equally treated Applied by various EU member states Equal treatment of equity financing and debt IP box features: financing Restrictive box: narrow IP definition NID system features: (patents) Notional interest deduction only on Substance requirements surplus equity Maximal tax relief : 80% Reduction of the tax basis Cantonal tax ruling Safe harbor rate (arm’s length principle), but not less than 2% 10 Date
SWISS CORPORATE TAX REFORM III Proposed tax measures to increase attractiveness of Switzerland: Abolition of issuance tax on equity Participation relief: Direct exemption from the taxable basis (e.g. dividends no longer offset loss carry forward) No minimum holding periods or quotas Loss carry forward without limitation Swiss Holding Company could offset losses incurred by its subsidiaries provided certain requirements are met Step-up of value of business to market value: Change from privileged tax status to ordinary taxation Immigration into Switzerland Compensatory measures: Introduction of a capital gains tax on privately held assets (capital losses would become tax deductible from capital gains) Limitation of the partial exemption on dividend received by individuals from qualifying participations at 70% 11 Date
EXPECTED TIMELINE UNTIL IMPLEMENTATION End of January Summer 2016 Summer 2017 2015 Debates in both Possible national End of consultation Federal Houses referendum process 2015 2016 2017 2018 1 st January 2018: earliest date September 2014 June 2015 for CTR III Publication of the Draft legislation + becoming consultation report Message of the legally effective Federal Council submitted to the Parliament 2-year transitional period for amendment of Cantonal legislation 12 Date
04 AUTOMATIC EXCHANGE OF INFORMATION Genève, le 22 janvier 13 2015
AUTOMATIC EXCHANGE OF INFORMATION (AEOI) 2017 11/2014 2016 2018 Consultation Data collection Parliamentary debates 14.1.2015 Summer 2015 Switzerland will separately determine with which countries the AEOI will apply Issues of regularisation of the past would be analyzed on a case by case basis and according to the possibilities offered by the partner states Domestic bank client confidentiality will not be affected by the implementation of the new global standard 14
05 INDIVIDUAL TAX OVERVIEW Lausanne, le 22 janvier 15 2015
LUMP-SUM TAXATION REGIME Refusal of the federal initiative « Halte aux privilèges fiscaux des millionnaires » Refusal of the Geneva cantonal initiative « Pas de cadeaux aux millionnaires: initiative pour la suppression des forfaits fiscaux » Lump-sum taxation regime remains applicable at federal level and at cantonal/communal level (exceptions: Appenzell Outer-Rhodes, Basel-City, Basel- Land, Schaffhausen and Zurich) Legislative amendments (introduced by the federal law dated 28.9.2012 regarding the lump-sum taxation) : Taxable basis: Federal level: at least CHF 400’000 or 7 times the housing expenses of the tax payer (new art. 14 FDTL will come into force on January 1 st , 2016) Cantonal level: must set at their discretion a minimum threshold (new art. 6 FTHL came into force on January 1 st , 2014 – transitional period until January 1 st , 2016 to adapt their law) Transitional period of 5 years for the existing rulings FDTL: Federal Direct Tax Law FTHL: Federal Tax Harmonization Law Lausanne, le 22 janvier 16 2015
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