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Consultation on tax proposal 17 in Switzerland

On 6 September 2017, the Swiss Federal Council initiated the consultation on the new tax proposal 17 (TP17), which is supposed to be a significant contribution to having an appealing location and thus to added value, jobs and tax receipts. Also, the reform will be in line with international requirements concerning corporate tax law.

The Federal Council has drafted a new version of the tax proposal 17 (hereinafter – TP17) after the failed third series of corporate tax reforms about half a year ago. The wide-scale hearings following the referendum confirmed that a reform was still an urgent matter, as the existing corporate taxation no longer met the international requirements, with an increasingly negative impact on Switzerland as a location.

The new proposal contains major adjustments and takes account of the referendum results. Thus, TP17 provides for several tax measures to maintain Switzerland’s competitiveness. All cantons will introduce a patent box. Moreover, they can grant R&D tax deductions, if the need arises. The further novelties include inter alia abolition of the arrangements for cantonal status companies, relief restriction, increased dividend taxation, increase in the cantons’ share of direct federal tax, capital tax adjustments, extension of the flat-rate tax credit, disclosure of hidden reserves, and some others.

Along with the law, the consultation will also cover the two ordinances on the reduced taxation of profits from patents and similar rights (clarification of the patent box) as well as on fiscal equalization and cost compensation (fleshing out of resource equalization).

The consultation will run for three months and end on 6 December 2017, and the Federal

Department of Finance (FDF) is planning to submit the dispatch for the Parliament to the Federal Council in spring 2018. Consequently, if adopted, TP17 will not enter into force before 2020.