Federal Act on Tax Reform and AHV Financing

Overview of the most important developments regarding Tax Proposal 17

Tax reform and AHV financing (STAF) 

With the reform of the Swiss corporate tax system, which came into force at the beginning of 2020, the former Swiss tax regimes which were criticised by the OECD and EU have been abolished and replaced by new, internationally compliant and competitive instruments. This was done with the aim of securing the tax attractiveness of Switzerland as a business location over the long term, ensuring international acceptance and guaranteeing sufficient tax revenues. You can see here how the requirements of the Federal Tax Harmonisation Act have been implemented in the cantonal tax laws. 

Key points of the tax reform and AHV financing (STAF)

Introduction of the patent box 

Tax benefits for income from intellectual property rights are used to promote research and development and the resulting value creation in these areas. The wording of the law provides a precise definition of which patents or similar rights qualify for box taxation. In addition to this, the regulations contain detailed specifications on the calculation mechanism used as well as the documentation requirements. The nexus approach is consistent with the international OECD standard, and can be applied by patent, product or product families. The patent box deduction has been implemented in all cantons, but in some cases only to a limited extent.

Further information: www.patent-box.org

Introduction of special deduction for R+D costs

The introduction of an additional special deduction for research and development expenses is optional for the cantons, but in most cases has been introduced. This deduction may not exceed 50% of the relevant R&D expenses in Switzerland. It is left to the taxpayers to analyse to what extent they can benefit from the patent box, the special deduction or a combination of both. 

Further tax policy measures

Other changes include:

  • the introduction of a self-financing deduction at the state and municipal tax level in the Canton of Zurich,
  • limiting the maximum relief of all new measures at the cantonal level to 70%,
  • more uniform tax treatment for cantonal and federal taxes in the event of a change of tax status or of companies moving into or out of Switzerland,
  • the reduction of corporate tax rates in various cantons (financed by increasing the cantons’ share of direct federal taxes),
  • adjustments to cantonal capital tax rates, 
  • the introduction of a proportionality rule in the capital contribution principle for companies listed on a Swiss stock exchange, 
  • increasing the partial taxation of private dividend income to 70% for federal taxes and at least 50% for cantonal and municipal taxes, and
  •  increasing the AHV contribution rates of employers and employees by 0.15% each as a social compensation measure, leading to additional financing of CHF 2 billion per year for the AHV.

Target tax burden after tax reform and AHV financing come into force

graph that shows curve and development of reform per canton

Our service regarding tax reform and AHV financing (STAF)

  • developing the patent strategy, simulation and application to the tax authorities for the patent box deduction 
  • simulation and application to the tax authorities for the R&D deduction 
  • simulation and application to the tax authorities regarding the self-financing deduction (in the Canton of Zurich)
  • simulation and application to the tax authorities regarding moving into and out of Switzerland and transition rules
  • simulation of effects on capital tax rates
  • advice on adapting existing operational and legal structures, including the transfer pricing model for the optimal use of STAF instruments
  • advice on the usefulness of STAF instruments, also taking into account the OECD minimum taxation for large companies as well as consideration of intercantonal aspects where applicable 

Contact us

Armin  Marti

Armin Marti

Tax Policy Switzerland, PwC Switzerland

Tel: +41 58 792 43 43