Federal Act on Tax Reform and AHV Financing

Overview of the most important developments regarding Tax Proposal 17

Tax reform and AHV financing (STAF) entered into force on 1 January 2020!

The reform of the present corporate taxation system is an important issue and is aimed at securing the fiscal attractiveness of Switzerland in the long term, while guaranteeing international acceptance as well as sufficient tax revenues. After 66.4% of Swiss voters accepted the tax package in May 2019, it came into force on 1 January 2020. Most cantons have already included the requirements from the Tax Harmonisation Act in their cantonal tax laws. The remaining cantons are planning to do so during 2020, effective from 1 January 2020.

We’ll be happy to give you details about the latest status and show you how your company can benefit from the changes that have come into force.

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

Introduction of patent box and special deduction for R&D costs

Research and development activities and their value creation in these areas are promoted with tax advantages for income from intellectual property rights. The text of the law provides for a precise definition of which patents or comparable rights qualify for box taxation. In addition, the ordinance contains detailed provisions on the calculation mechanism and documentation requirements. In accordance with the international OECD standard, the Nexus approach can be applied by patent, product or product family. The implementation of the patent box is mandatory at cantonal level.

The introduction of a special deduction for research and development expenses is optional for the cantons. This deduction may not exceed 50% of the relevant R&D expenditure in Switzerland.

EN: Further information: www.patent-box.org

Introduction of a deduction for equity-financing in the canton of Zurich

The introduction of a notional interest deduction on so called security capital intends to prevent excessive indebtedness by companies. Parliament has decided that this measure may only be implemented by cantons with a statutory cantonal and communal tax rate of at least 13.5% at the cantonal capital.

Only the canton of Zurich meets this requirement and has introduced the deduction for equity-financing. This instrument isn’t available at Swiss Federal level.

Further tax policy measures

Other changes introduced on 1 January 2020:

  • Increasing the cantons' share of the direct federal taxes which they can use to reduce cantonal profit tax rates,
  • limiting the maximum relief for all new measures at cantonal level to 70%,
  • Adjustments to cantonal capital tax, 
  • Introduction of a proportionality rule under 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,
  • as well as more uniform tax treatment in the event of changes in tax status, inflows and outflows of companies.
  • As a social compensation measure, an additional CHF 2 billion financing of the AHV was decided by increasing the AHV contribution rates of employer and employee by 0.15% each.

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

What we can do for you

The abolition of cantonal tax status and principal taxation as well as the tax rules for Swiss finance entities and the introduction of the reform measures mentioned above can trigger a profound change in the tax burden of a company in Switzerland. There are winners and losers. The aim of the impact analysis is to show how the reform will have a concrete impact on the tax burden of your Swiss company/ies. We also show you how a company can best position itself in the new statutory tax environment and make best use of the new tax measures by making changes to its existing structures and business models.

PwC has developed analysis tools to simulate the effects of the following elements of the reform in advance. Of course, a combined analysis of various measures is also possible.

  • Simulation Patentbox and R+D Abzug
  • Simulation of notional interest deduction on equity (in Canton Zurich)
  • Simulation transition rules
  • Simulation of effects on capital tax

The OECD's new rules on international transparency are designed to ensure taxation at the place where profits are actually generated. This leads to additional compliance tasks and higher demands on your company's tax risk management. Our specialists will be happy to assist you.

Together with you, we develop a transfer pricing model that takes into account the needs of your company in the light of the new OECD regulations.

We also define transfer pricing strategies that are in line with the principle of arm's length pricing. In addition, we support you in making your pricing model more sustainable and protecting it better.

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Contact us

Armin Marti

Armin Marti

Partner and Leader Tax Policy, PwC Switzerland

Tel: +41 58 792 43 43