20.07.2010 / breakingTAXnews / 24-10 / Switzerland: New Capital Contribution Principle Regulation
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The New Swiss Capital Contribution Principle Regulation Requires Separate AccountsThe capital contribution principle is a new regulation in Swiss tax law coming into force as per 1 January 2011. The new rule foresees the exemption from Swiss income and withholding tax of distributions out of capital contribution reserves. It is expected that the Swiss Federal Tax Administration will publish a circular letter after the summer break with details regarding implementation. Only capital contributions made after 31 December 1996 qualify for the tax exemption. All Swiss companies are in principle affected by the change of regulation; however, companies held by individual shareholders as well as foreign-owned companies can potentially benefit more significantly. The capital contribution principle is based on very strict formalistic rules and deadlines. Any nonobservance of one of the rules could lead to disallowance of the advantage. Taxpayers should identify all capital contributions made by shareholders after 31 December 1996 until now. All capital contributions after 31 December 1996 will need to be booked into a separate account in the balance sheet and all changes on this account will have to be notified to the tax authorities using a specific new form. ImplicationsAs soon as the circular is published taxpaying entities should identify tax privileged capital contributions and take appropriate measures. A deferral of dividend payments until 2011 may be recommendable. For further information, please contact Andreas Staubli, Nathalie Urban or your usual PwC tax advisor |