We track the developments and reactions regarding the Steuervorlage 17 (SV17) / TRAF in the individual cantons for you.
General overview cantons
The following table shows the rough implementation of the Steuervorlage 17 / TRAF in the cantons:
Canton of Aargau
The Grand Council has approved the amendment of the cantonal tax legislation. If no referendum is held, the cantonal tax reform can enter into force on 1 January 2020.
After the second round of consultations, the Grand Council's Commission for Economic Affairs and Taxation (EATC) continues to approve the amendment to the cantonal tax legislation. Doubts concerning deductions for research and development expenses have been eliminated. Therefore, no changes were made to the content of the Steuervorlage 17. After conditional approval by the Grand Council in September 2019, the cantonal reform will enter into force on 1 January 2020.
At the end of March 2019, the Grand Council’s Commission for Economic Affairs and Taxes (VWA) of the Canton of Aargau approved the revision of the cantonal tax legislation. The Commission's acceptance only required a request for review. The only echo from the Commission is the desire for more information on research and development expenditure in the second round of consultations. Questions were then raised with regard to the patent box - but this was due to a lack of information on the part of the federal administration. Overall, however, the revision for the canton was balanced. Further deliberations in the Grand Council are planned for summer 2019.
On 8 March 2019, the State Council of the Canton of Aargau submitted its message on the Steuervorlage 17 / TRAF to the Grand Council. The cantonal implementation shall be as balanced as possible and de-signed to benefit innovative companies. At the same time, the population is promised that the reform will not lead to a reduction in public services. The State Council took into account primarily all those voices in the hearing which proclaimed a cantonal dividend taxation of 50 %. It is now up to the Grand Council to discuss the message. The first round of discussions is expected to take place as early as June 2019. The definitive vote will then take place in September 2019.
The hearing on the implementation of the Steuervorlage 17 / TRAF initiated by the State Council on 19 October 2018 will last until 24 December 2018. This will ensure the timely elaboration of the partial revision of the tax legislation and restore legal certainty for corporations, especially as the implementation of the Steuervorlage 17 / TRAF in the cantons is expected to come into force on 1 January 2020. The aim of the revision is to establish the Canton of Aargau as an attractive location in comparison to other cantons and foreign countries. The first results of the hearing have not yet been published.
The State Council has further substantiated the implementation of the Steuervorlage 17 / TRAF in the Canton of Aargau and plans to reduce the profit tax rate after all, in addition to the measures already announced in December 2017: The overall tax burden in the upper rate bracket (profits over CHF 250,000) will be reduced from 18.6 to 18.2 %, that in the lower rate bracket from 15.1 to 14.7 %. As a counter-financing measure, the State Council also proposes an increase in the privileged dividend taxation to 60 % and a change in method from the partial rate to partial income procedure.
For the Canton of Aargau, the scope of action for reducing profit tax is rather limited. On the other hand, the scope for action regarding the new special regulations is to be fully utilised in the cantonal implementation of the Steuervorlage 17 / TRAF: A tax relief of 90 % is to be granted in the patent box scheme and an additional 50 % for research and development.
The cantonal government wants to hold talks with stakeholders before submitting its statement on the Steuervorlage 17 / TRAF to Berne.
Canton of Appenzell Ausserrhoden
In October 2018, the Government Council of the Canton of Appenzell Ausserrhoden submitted the partial revision of the cantonal tax law for consultation. The ultimate goal is to render the canton attractive as a business and tax location for companies on the one hand, and as a place of work and residence on the other. The Government Council envisages the following instruments: Tax relief on income from the patent box at 50 %, the deduction of 50 % for research and development and a maximum relief limit of 50 %. The reduction of the profit tax rate is not up for debate in the Canton of Appenzell. It is to remain at the current level of 6.5 %. Further, there will be no change in dividend taxation. It remains at 60 %. The only modifica-tion in this regard would be the change from the half-rate taxation procedure to the partial taxation proce-dure. The consultation period lasted until 21 of December 2018 - to date no results have been communi-cated.
Canton of Appenzell Innerrhoden
On 3 May 2019, the State Commission of the Canton of Appenzell Innerrhoden provided information on the cantonal draft of the Steuervorlage 17 / TRAF and advocated the adoption of the federal revision. A few days before this media release, the State Commission launched a consultation on the cantonal implementation of the bill. The revision is not to be submitted to the Landsgemeinde for a vote until 2020. The key points, however, are mainly the following: The patent box is to provide a 10 % relief, no deduction for research and development expenditure is planned, the relief limit is 50 %, total tax burden between 11.5 and 12.66 %, deduction of child care costs amounting to 18 %, the increase of the maximum deductions for insurance premiums.
The State Comission of the Canton of Appenzell Innerrhoden (Standeskommission) has provisionally established the basic parameters for the cantonal implementation of the Steuervorlage 17 / TRAF. The State Commission wants to reduce the current profit tax rate from 8 % to 6 %. With regard to the taxation of dividends, the State Commission wishes to adhere to the well-tried partial rate procedure and not to apply the partial taxation procedure as intended in the Steuervorlage 17. This demand has once again been made clear to the Federal Government. Regarding the other instruments, the State Commission would like to limit itself to implementing the minima laid down in the Steuervorlage 17 / TRAF. An increased deduction for research and development expenditure is to be waived.
Canton of Basel-Land
Not long before the federal referendum on tax proposal 17 / TRAF, the Finance Commission of the Canton of Basel-Land approved the proposal for tax proposal 17 / TRAF for the attention of the District Administrator. It agrees with the cantonal government that corporate taxes should be revised in line with the cantonal government's model. On the issue of social compensation, however, the Finance Commission is not following the government's lead: instead of increasing family allowances, according to the Finance Commission, it would be better to increase premium reductions and deductions for childcare costs for third parties. This means the following for corporate taxes: The reduction of the profit tax rate from 20.7 to 13.45 %, a deduction for research and development of 20 %, a patent box with 90 % relief and a maximum relief limit of 50 %.
In a press release, the State Council of the Canton of Basel-Landschaft commented on the latest decisions taken by the Federal Assembly on 28 September 2018. There are no major deviations from the revision as presented on 25 April 2018. Only the taxation of dividends was set at 60% by the State Council. The central concern of the cantonal authorities is to preserve and promote the attractiveness of the canton as a business location in intercantonal and international comparison.
The State Council of the Canton of Basel-Land submits the implementation of the Steuervorlage 17 / TRAF for consultation. The consultation-process will last until 20 August 2018, with the central element being the reduction of the profit tax rate to 13.45 %. In addition, the capital tax is to be reduced from the current maxi-mum of 3.8 ‰ to 1.6 ‰. In the case of the paten box, income from patents and comparable rights is to be relieved by 90 %; for research and development, an additional deduction of 20 % is intended. The relief limit shall be set at 50 %. The increase in the monthly child and education benefits as envisaged by the Federal Council is also included in the State Council's proposal. The State Council has not yet made a statement on the results of the consultation process, but on the vote of the Federal Assembly on 28 September 2018 (see communication of 9 November 2018).
The State Councils of the Cantons of Basel-Landschaft and Basel-Stadt welcome the swift action of the Federal Council and the key figures communicated on 31 January 2018 for the Steuervorlage 17 / TRAF. The mandatory patent box and voluntary deductions for research and development expenditure are impor-tant new instruments for the region. In addition, they welcome that the cantonal share of direct federal tax is now to be increased to 21.2 % instead of 20.5 % after all. For the State Councils of the Cantons of Basel-Landschaft and Basel-Stadt, it is clear that the intention is to reduce the ordinary profit tax rates.
The State Council of the Canton of Basel-Land has issued its statement regarding the Steuervorlage 17 / TRAF. It largely supports the SV17 but calls for the cantonal share of direct federal tax to be increased to 21.2 % and not just to 20.5 %. In addition, the State Council demands that the lower limit for dividend taxation be set at 60 % and criticises the linking of the SV17 with the increase in the minimum requirements for family benefits.
As compensation measures, the government of the Canton of Basel-Land wants to introduce the patent box as well as an additional deduction for research and development costs (input subsidies). The limit of the tax relief should be set at approximately 50 %. The main concern of the cantonal reform is a reduction of the effective profit tax rate to below 14 %. Additionally, the cantonal government plans to lower the capital tax rate.
Basel-Land's administration demands the swift reissue of a corporate tax reform, noting that legal certainty and planning security are crucial for the corporations. Furthermore, the administration wants to preserve Basel-Land as a fiscally attractive business location and remains in close contact with Basel-Land's economy. Status companies (holding companies, mixed companies and principal companies) are of particular economic importance for the canton of Basel-Land.
Canton of Basel-Stadt
At the same time as the federal vote on the adoption of the revision of the Federal Act on Tax Reform and AHV financing, the voters of the Canton of Basel-Landschaft were confronted with the decision of the Grand Council on the partial revision of the cantonal tax legislation. Both bills were accepted in the canton.
As a result of the cantonal vote regarding the revision of the tax law and the resulting "yes" vote by the electorate, the State Council immediately put individual measures into effect. Other measures are on hold until the result of the federal referendum of 19 May 2019. The following measures have been put into effect:
- Retroactive entry into force of the income tax rate reduction and the increase in the deduction for health insurance premiums and, for legal entities, the reduction in the profit tax rate and capital tax rate as of 1 January 2019.
- Increase in premium reductions as from 1 July 2019.
- Increase of partial taxation of dividends due to the pending referendum of 19 May 2019 with effect from 1 January 2020.
- Entry into force of the patent box due to the referendum, also with effect from 1 January 2020.
Together with the federal vote on urban sprawl of 10 February 2019, the citizens of the canton of Basel-City voted on the revision of the Tax Act and the referendum against it. The referendum committee was unable to record any success. On the one hand, at all party levels, as well as among the general public, the bill pre-sented by Finance Director Eva Herzog came off well. With a proud 78.78 % in favour, the revision of the tax law was approved. The successful vote was probably triggered by the combination of corporate taxation with tax relief for the benefit of individuals.
A referendum was raised against the vote on the implementation of the tax proposal by revision of the tax legislation, which had taken place on 19 September 2018. Around 3'300, more than 2'000 signatures re-quired, were collected from party representatives of various left-wing groups. The Referendum Committee considers the reduction of the profit tax rate to 13 % a thorn in its side. The main concern is that there will be considerable tax loss of About CHF 130 Million. The population will vote on the referendum on 10 February 2019.
On this day, the Grand Council of the Canton of Basel-Stadt was able to reach a compromise regarding the implementation of the Steuervorlage 17 / TRAF. Three objectives were achieved: Firstly, the canton remains an attractive tax location for companies and jobs - even if the tax burden for holding structures increases. Se-condly, the income taxes of private individuals will decrease by around CHF 100 Million per year. Thirdly, the canton is making socio-political progress, which should lead to further relief for the population. Overall, there is talk of a reduction of CHF 150 million per year. Finally, the Canton of Basel-Stadt has given a positive response regarding the coupling of the tax reform and AHV financing.
Status companies are very important for the Canton of Basel-Stadt: they contribute 60 % of the canton's income from profit and capital tax and offer 32'000 full-time jobs in the canton. For this reason, the State Council sought talks with the parties represented in the Grand Council and was able to negotiate the following «Basel compromise»: Firstly, the patent box is to be introduced. Secondly, the ordinary income tax burden will be reduced to 13 %. Thirdly, the ordinary capital tax rate is to be reduced to 1 ‰ Fourthly, the partial taxation of dividends will be increased from the current 50 % to 80 %. Fifthly, as social compensation, the lower income tax rate is to be reduced from 22.25 % to 21.50 % and the insurance deduction for self-payments for compulsory health insurance is to be increased to CHF 3'200. In addition, the child and education benefits are to be increased, burden sharing among the family compensation funds introduced and the cantonal contributions to the premium reductions for health insurance increased by CHF 10 million. With this compromise achieved, the Grand Council can begin its deliberation on the SV17.
The State Councils of the Cantons of Basel-Landschaft and Basel-Stadt welcome the swift action of the Federal Council and the key figures communicated on 31 January 2018 for the Steuervorlage 17 / TRAF. The mandatory patent box and voluntary deductions for research and development expenditure are important new instruments for the region. In addition, they welcome that the cantonal share of direct federal tax is now to be increased to 21.2 % instead of 20.5 % after all. For the State Councils of the Cantons of Basel-Landschaft and Basel-Stadt, it is clear that the intention is to reduce the ordinary profit tax rates.
The government of the Canton of Basel-Stadt plans the introduction of a patent box but refrains from implementing input subsidies as proposed by the Federal Council. Secondly, the ordinary profit tax rate is to be set at 13 % and the capital tax rate at 1 per mil. However, not only the tax rates for companies are to be reduced, but also the income tax rates for the general public. Another important aspect for the cantonal government is the social compensation: it wants to increase the family benefits by CHF 75 per month and child. Since this increase in family benefits led to criticism from the business sector during the consultation process, a risk equalisation scheme is to be introduced among the family compensation funds. Finally, the government council also wants to increase the premium reduction by CHF 10 million per year.
Canton of Berne
The consultation process shows that there is a need for action regarding moderate tax relief for natural and legal persons. The 2021 revision of the tax legislation intends to make it possible to decouple the taxation of natural persons from that of legal entities, whereby the respective groups can be selectively relieved / burdened. As of 2020, the deductions for research, development and the patent box are to be increased. Simultaneously, the capital tax rate for companies will be reduced. As of 2021, the deduction for third party childcare will be increased and the cantonal tax for natural and legal persons will be reduced. As of 2022, a further reduction of the cantonal tax rate for natural persons is to follow and the legislation on the taxation of road vehicles is to be revised with respect to an ecological point of view. Once fully implemented, these changes should result in cantonal revenue losses of CHF 89 million per year. The municipalities will lose less than CHF 10 million per year.
At the beginning of April, the Berne cantonal government launched the announced consultation procedure for the cantonal tax bill revision 2021. The key point and probably in contrast to many other cantons, the Canton of Berne would like to temporarily forego a reduction in profit tax. This is no coincidence. On 25 November 2018, the Bernese electorate decided not to lower the high profit tax rate. In the bill, however, tax compensation measures such as higher deductions for third-party child care costs and insurance deductions are to be introduced. The deduction for third-party childcare costs is to be increased from CHF 8,000 to CHF 25,000, thus strengthening the character as a family canton. Together with the increase in insurance deduction costs, this is expected to reduce income by around CHF 53 million. The consultation process lasted until 21 June 2019.
The referendum regarding the gradual reduction of the profit tax rate to 18.71 % was rejected by 53.6 % of the votes. The profit tax rate thus remains at 21.64 %.
In a press release, the State Council announced how the business location Berne could be rendered more attractive. Companies are to benefit from a gradual reduction in the profit tax burden. The reduction from 21.64 % to 20.20 % (2019) and further to 18.71 % (2020) still remains uncertain: On 25 November 2018, the people made the final decision by means of a referendum (see communication from 25 November 2018). The consultation process of the State Council regarding the structure of the Steuervorlage 17 / TRAF will take place in spring 2019.
On 16 August 2018, a referendum was submitted against the planned revision of the tax legislation as pre-sented by the Grand Council on 28 March 2018. The referendum took place on 25 November 2018 (see communication from 25 November 2018 regarding the results of the referendum).
The cantonal parliament passed the tax law revision 2019 with 92 to 51 votes. The revision intends to reduce the income tax burden from the current 21.64 % to 20.20 % in 2019 and then to 18.71 % in 2020. The State Council wants to carry out a further reduction once the Steuervorlage 17 / TRAF is adopted. However, the SP, the Greens, the Association of Public Service Personnel (VPOD), the Employees' Association Berne and the organisation "attac" have already announced a referendum against the tax law revision 2019.
The Canton of Berne has one of the highest corporate tax rates in Switzerland, with a profit tax rate of
21.64 %. With the Steuervorlage 17 / TRAF, Berne could be left even further behind. In its November session 2017, the Grand Council will now deal with the tax law revision for 2019, which intends a gradual reduction of the maximum profit tax burden over the course of three years.
Canton of Freiburg
The referendum held on 17 January 2019 called for a vote on the revision of the cantonal tax legislation regarding the reduction of the profit tax rate from 19.86 % to 13.72 %. Together with the extension of shop opening hours, this issue was put to the electorate. The reduction of the profit tax rate was approved with 55.8 % votes in favour. In order to prevent tax losses, the compensation measures adopted include an increase in family benefits to CHF 240 and funds for supplementary family care. The other instruments regarding the implementation of the Steuervorlage 17 / TRAF at cantonal level remain unchanged.
The referendum held on 17 January 2019 was successfully passed with 7096 signatures and submitted to the State Chancellery on the above-mentioned date. The vote took place on 30 June 2019.
A left-wing committee has taken up the referendum against the draft law concerning the revision of corporate taxes in the Canton of Fribourg, which was approved by the Grand Council on 14 December 2018. The vote is expected to take place in June 2019.
On 10 October 2018, the State Council adopted a message concerning the implementation of the Steuervorlage 17 / TRAF in the cantonal territory. The focus of the cantonal authority lies primarily on the following three pillars: reducing the profit tax rate for resident companies to 13.72 %, expanding social accompanying measures and increasing dividend taxation to 70 %. The wide-ranging and major expansion of social compensation is evident: child benefits amount to CHF 240 per year, investments of CHF 5.2 million in supplementary childcare and integration into the labour market, a further CHF 5.2 million for vocational training as wells as increasing the premium reduction budget by CHF 5 million are the intended measures. Further measures include in particular the possibility of deducting the patent box at the maximum rate of 90 %. The capital tax rate will be reduced from 0.16 % to 0.1 %.
Canton of Geneva
At the same time, the Geneva electorate voted on the federal bill TRAF and on its cantonal implementation. Geneva's 58.21 % voted in favour of revising the tax law. With effect from 1 January 2020, the tax rate of 13.99 % will apply to all legal entities.
The Grand Council adopted the Geneva Tax Reform (GTR) on 30 January 2019 and will hold a popular vote on 19 May 2019, parallel to the vote on the Steuervorlage 17 / TRAF at federal level.
On this date, the State Council of the Canton of Geneva announced a message on the implementation of the Steuervorlage 17 / TRAF. The most apparent change is the definitive announcement of the profit tax rate, which will be set at 13.79 %. Previously, there had been talk of a reduction to 13.49 %. Apart from the tax aspects, the State Council announced other adjustments, particularly with regard to social compensation.
The Canton of Geneva is of the opinion that the measures developed at cantonal level within the framework of the CTR III are also suitable for the Steuervorlage 17 / TRAF and that only minor adjustments are necessary. The Canton of Geneva welcomes the message issued by the Federal Council on 21 March 2018, in particular the increase in the cantonal share of direct federal tax to 21.2 % instead of 20.5 %. This decision will reinforce the Grand Council's consideration of reducing the profit tax rate to 13.49 %.
The proposals made by the steering body of the Federal Government are compatible with the plan of Geneva's finance committee. According to the cantonal council, it is a balanced project that aims for more consensus. The only point being criticised is the cantonal share on the federal tax. The canton of Geneva will work alongside other cantons to ensure that the cantonal share will be raised to 21.2 % again. On a cantonal level, the council will hold a meeting before September and develop a proposal. The cantonal council is of the opinion that the prior key points shall be kept in place. The new federal law regarding the Steuervorlage 17 / TRAF is expected to come into force on 1st January 2019. Consequently, the cantons will be given time until the 1st January 2020 for the implementation of the federal regulations into their cantonal legislation.
Canton of Graubünden
The Grand Council’s Commission for Economic Affairs and Taxation Committee (EATC) has discussed the government's message on the partial revision of the tax legislation for the Canton of Graubünden and has unanimously supported the proposal. However, opinions differed regarding the content. The majority of the Commission requested a reduction of 90 % instead of 70 % in the patent box. With regard to the relief limit, one minority in the Commission wants to raise the limit to 60 % and a second minority wants to lower it to 33 %, although the majority of the Commission supports the government's proposal with 55 %. The Grand Council will deal with these requests in the session of August 2019.
Shortly after the vote on the federal bill, the government of Graubünden adopted the message on the cantonal implementation of the Steuervorlage 17 / TRAF for the attention of the Grand Council. Specifically, the profit tax rate is to be reduced from 5.5 % to 4 %. Furthermore, the other instruments will be implemented as follows: The patent box guarantees a reduction of 70 %, the deduction for research and development is 50 % and the relief limit is roughly 55 %. An increase in the flat rate for professional expenses to CHF 3'500 is mentioned as a relief measure for natural persons. The Grand Council will discuss the bill in its session in August 2019. A possible popular Referendum is expected to take place on 9 February 2020.
The partial revision of the cantonal tax law of the Canton of Graubünden and the communal decrees envision the following instruments of adjustment for the Steuervorlage 17 / TRAF: Increase of the dividend taxation to 70 %, deduction possibilities within the framework of the patent box of 70 %, no deduction for research and development as well as a reduction of the profit tax rate from 5.5 % to 4 %. There are no measures intended for the purpose of social compensation. The proposal is subject to consultation until the end of November.
Canton of Glarus
At the traditional general assembly (Landsgemeinde) in Glarus, topics such as the dancing ban and shop opening hours as well as the amendment of the cantonal tax legislation were items on the agenda. The revi-sion of the tax legislation was debated for by far the longest time, which shows the relevance of the topic. The final result was that the profit tax for companies shall be reduced from 8 to 4.5 %. The prerequisite for this is the positive outcome of the federal vote held on 19 May 2019. Furthermore, the proposal of the go-vernment council is also being followed with regard to dividend taxation and around 70 % of participations will be subject to taxation. The increase of the health insurance premium deduction by approximately 25 % dampens the effects of the proposal at the level of natural persons.
In a message from the State Council of the Canton of Glarus dated 18th December 2018, the cantonal parliament was presented with an amendment to the cantonal tax legislation. In order to compensate for the abolition of the domiciliary companies which are broadly present in the Canton of Glarus, a reduction in the profit tax rate is planned. A reduction from the current 15.7 % to 12.43 % shall be carried out. The greatest concern is to maintain the attractiveness of the location in an intercantonal comparison. Concerning the accompanying measures, a patent box with a low deduction possibility is planned in particular. At the same time, the increase in the tax on shareholdings to 70 % will compensate for the expected tax losses. In addition to these measures affecting legal entities, natural persons will benefit from an increase in deductions of health insurance premiums and a reduction in deductibles for medical expenses.
Canton of Jura
The parliament of the Canton of Jura adopted the amendment of the tax legislation, based on the government's message of 6 February 2019, in the second reading. The profit tax is to be reduced to 15 % and the patent box (90 %) and the deduction for research and development (50 %) are to be introduced at cantonal level. The relief limit has been set at 70 %. The privileged dividend taxation has been adjusted to 70 %.
In mid-October, a media release issued by the Jura government announced the first cornerstones regarding the implementation of the Steuervorlage 17 / TRAF. The main concern of the authorities is to maintain the attractiveness of the business location by reducing the profit tax burden from the current 20.5 % to either 17 % or even 15 %. The accompanying measures such as a deduction within the patent box and for research and development were set at 90 % and 50 % respectively. The relief limit is set at a maximum of 30 %. The privileged dividend taxation amounts to only 30 % (taxation of 70 %). In order to promote social balance, the tax authorities would like to increase tax deduction possibilities for childcare costs and health insurance premiums. The consultation process lasted from 19 October 2018 to 30 November 2018.
Canton of Lucerne
On the first day of the session of the Cantonal Council, the Council discussed the amendment to the canto-nal tax law that becomes effective in 2020. 79 votes in favour, 15 against and 16 abstentions approved the bill in the first session. The civil parties around CVP, FDP and SVP jointly prevented an increase in taxes on profits and wealth. The profit tax rate for corporations and cooperatives is to remain at 1.5 %. The govern-ment originally intended to increase the rate to 1.6 %. The adjustment of the wealth tax to 1 ‰ was also un-successful. The parties reached an agreement at 0.875 ‰ with a time limit of 4 years. After expiration of the time limit the tariff falls back again to the original 0,75 ‰. In total, the canton loses around 11.7 million Swiss Francs in revenue per year.
On 23 May 2018, the government of the Canton of Lucerne launched the consultation process on the revi-sion of the tax legislation in response to the Steuervorlage 17 / TRAF at federal level. The canton empha-sises that only absolutely necessary measures are to be carried out, as the canton of Lucerne is already known as an attractive location with a low profit tax rate for corporations. The cantonal government does not make any new statements with regard to the intended measures. Reference can be made to the press release issued by the cantonal government on 22 March 2018. The consultation process lasted until 31 August 2018. Consultation results are not available yet but the Cantonal Council has already debated over the bill (see communication from 28 January 2019).
According to a media release by the State Council, the Canton of Lucerne is well positioned for the implementation of the SV17 following the tax law revisions in 2005, 2008 and 2011. At 12.3 %, the tax burden for companies in the Canton of Lucerne is currently the lowest in Switzerland. The Canton of Lucerne can therefore even allow itself to increase the profit tax rate by 0.1 % to 1.6 %. The State Council also intends to introduce the other alternative measures in a very hesitant manner only. The consultation report calls for the following measures: A maximum relief of 10 % should be possible by means of a patent box. A relief limit of 70 % and a fixed capital tax of 0.001 % for equity shares attributable to qualified participations, patents and group receivables are to be introduced. The partial tax rate for income from relevant participations is now to be set at 70 %. The wealth tax rate per unit is to be increased from 0.75 to 1.0 ‰ and the tax-exempt amounts to CHF 100'000 (single persons), CHF 200'000 (married persons) and CHF 20'000 (per child).
Canton of Neuchâtel
The Grand Council adopted the amendment of the cantonal tax legislation as proposed by the Council of State. The tax reform provides for changes regarding natural and legal persons. The profit tax rate for companies will be reduced from 15.6 % to 13.6 %. The patent box (20 %) will be introduced and the deduction for research and development is to increase by 50 %. The privileged dividend taxation is to be increased to 70 % and the relief limit has been set at 40 %.
In a press release issued by the State Council, it adhered to the report published in the summer regarding the adjustment of the cantonal tax legislation to the Steuervorlage 17 / TRAF. Only a few changes were made. It is the cantonal government's intention that the reform shall benefit all players in the canton. In addition to improving the attractiveness of the canton, it is essential to preserve resources and jobs.
In a report from the State Council of Neuchâtel to the Grand Council, the State Council made a distinction between two groups of cantons. On the one hand, there are cantons such as Zurich, which are only making minor reductions in their profit tax rates, but are relying on a liberal implementation of the accompanying measures such as deductions for research and development. On the other hand, there are cantons such as Geneva, which are pursuing the opposite strategy. Neuchâtel belongs to this latter group. As a result, the following objectives are being pursued in the implementation: The profit tax rate will be reduced from 15.6 % to 13.4 %, the patent box will be taxed at 20 % and research and development at 40 %. The latter two mea-sures are limited to a maximum reduction in taxation of 40 %. Dividends are to be taxed at 70 % in future.
Canton of Nidwalden
In the media release of the State Chancellery, the State Council of the Canton of Nidwalden provides information on the revision of the cantonal tax legislation as of 2020. From the consultation process, the cantonal executive concluded that the basic support of the parties, institutions and organisations consulted was provided. Finally, cantonal government adhered to the already stated cornerstones of cantonal implementation of the bill. As a result, the cantonal parliament - as the competent legislative body - adopted the revision of the cantonal tax legislation in two readings at the end of May and the end of June.
Strengthening competitiveness. This was the motto of the cantonal government of Nidwalden on 14 Novem-ber 2018, when it launched the consultation process on the revision of the cantonal tax legislation. In its statement it also specified the parameters for the implementation. In addition to the profit tax reduction to 11.97 %, the aim is to achieve a maximum relief in the taxation of the patent box. Meanwhile, the dividend taxation remains at the current level of 50 %. The Government Council has yet to comment on the consul-tation process.
The government of the Canton of Nidwalden has set the parameters for the changes in its tax legislation. The canton intends to remain tax attractive and to be ready when the national tax bill comes into force in 2020. The profit tax burden is to be reduced from 12.66 % to 11.79 %. This will be possible primarily thanks to the planned increase in the cantonal share of the federal tax from 17 % to 21 %. The national churches are to receive only 7 % instead of 9 % of the tax revenues and the difference is to go to the municipalities. The Canton of Nidwalden also wants to tax capital benefits from occupational pensions (3rd pillar and pension fund) less heavily. It is also planned to increase the education allowance by CHF 20 to CHF 290 per month. With all these measures, taxes could be reduced appropriately without risking a tax increase. The cantonal tax bill will now be submitted for consultation until February 2019 and in May / June next year the cantonal parliament will address the package if the Swiss people will vote in favour of SV17 / TRAF beforehand. If they vote no, the parliament would have to re-evaluate the situation, because then the federal counter-financing measures would not take effect.
Canton of Obwalden
The amendment to the cantonal tax legislation contains, in addition to the implementation of the TRAF proposal, a partially limited increase in the cantonal tax rate by 0.3 units, of which 0.1 units are temporary until 2024. The amendment to the tax legislation promotes the implementation of the federal Tax Reform and AHV Financing (TRAF) on the one hand and generates a balancing of cantonal finances on the other. The amendment was adopted by the cantonal parliament on 28 June 2019 with 47 votes in favour.
In mid-April, the State Council adopted an addendum to the revision of the cantonal tax legislation. From the consultation process, the State Council drew the conclusion that the cantonal implementation of the bill should remain largely as proposed. It is now also being proposed to allow a 50 % deduction for research and development costs. The cantonal parliament discussed the proposal on 23 and 24 May 2019. The cantonal electorate will also vote on the bill on 22 September 2019.
The State Council of the Canton of Obwalden started the new year with the launch of the consultation pro-cess on the cantonal implementation of the Steuervorlage 17 / TRAF. Compared to the press release of 22 March 2018, the patent box is now to be taxed privileged with a 90 % reduction. The relief limit is now 70 % and the deduction for research and development 150 % of the maximum expenditure. The lowest threshold for the reduction of the capital tax is expected to be 0.001 %. No change is planned in the profit tax rate. With regard to natural persons, the State Council would further like to increase the cantonal tax rate by 0.3 units to a total of 3.25 units, limit the deduction of transportation expenses to CHF 10'000 and increase the real estate gains tax from 1.8 % to 2 %. This is expected to result in additional income of CHF 11.1 million. In the opinion of the authorities, this is necessary to compensate for the deficit resulting from the Steuervor-lage 17 / TRAF. The consultation process lasted until 15 March 2019. As of September 2019, the bill is to be submitted to a referendum in the canton.
In a press release, the State Council of the Canton of Obwalden announced the first benchmarks for the planned implementation of the Steuervorlage 17 / TRAF. The State Council emphasises that the bill approved by the Federal Council is also of importance for the Canton of Obwalden. The instruments and measures contained therein serve the purpose of remaining an attractive location for companies. The profit tax burden is not to be changed within the framework of the SV17. However, the patent box with a deduction of 80 % and an additional research and development deduction of 50 % are to be introduced. In addition, the capital tax is to be reduced and the possibility of tax-free disclosure of hidden reserves (step-up) when leaving the cantonal tax status is to be granted.
Canton of Schaffhausen
The Canton of Schaffhausen, which has a significantly higher percentage of status companies than other cantons, is relying on an economy- and family-friendly implementation of the Steuervorlage 17 by means of an amendment of the cantonal tax legislation. The authorities confirm this in a press release issued by the State Chancellery. The reduction of the profit tax rate to initially 3.95 % and later to 2.7 % is still being ad-hered to. In total, this amounts to a burden of 12.35 %. In future, the patent box will allow a maximum privi-lege of 90%, while the capital tax rate will be adjusted as well and a deduction for research and develop-ment will be possible from the 6th year after the entry into force of the cantonal regulation. Measures for private individuals, particularly families, will also be included: The insurance deduction will increase by 200 to 1'250 Swiss francs, depending on family circumstances. Families will also benefit from a tax credit of 320 Swiss francs per child and per year. In order to promote demographic development, an increase in family and education benefits of approximately 30 and 40 Swiss francs respectively is planned as an accompan-ying measure.
In August, the Canton of Schaffhausen published the implementation strategy for the Steuervorlage 17 / TRAF in the canton's territory. The previously known points, which were announced in the media release of 23 January 2018, were reaffirmed. New, on the other hand, is the gradual reduction of the profit tax rate to 3.75 % and 2.5 %. Furthermore, the planned dividend tax rate of 70 % was modified. The reason for this is a possibly occurring locational disadvantage. As a counter-financing measure, the minimum tax on non-operational real estate owned by legal entities is to be increased. Inaddition, the canton is waiving higher deductions for research and development for the time being, but would like to reduce the tax burden for natural persons by increasing the deduction for insurance.
The proportion of status companies in the Canton of Schaffhausen is significantly higher than in most other cantons, which is why particularly large parts of the direct federal tax, but also of the cantonal and municipal taxes are at stake in the course of the Steuervorlage 17 / TRAF. The cantonal government views a future overall tax burden of 12-12.5 % for all companies as a core element of the cantonal implementation of the SV17. But there shall also be reliefs for natural persons: in addition to the increase in child benefits proposed by the federal government, the cantonal government intends to increase the deduction for insurance costs. Other measures of the cantonal corporate tax reform include the introduction of a patent box and a dividend tax rate of 70 %. An initial relief limit of 60 % is intended to moderately limit the relief.
Canton of Schwyz
After the consultation process in mid-2018, the State Council adopted the report on the cantonal design of the Steuervorlage 17 / TRAF for the attention of the cantonal parliament on 28 November 2018. As the preparatory commission, the State Economic Commission discussed the bill on 25 January 2019. In a media release of 26 March 2019, the State Council commented on the Commission's deliberations: the profit tax rate is to be reduced to 1.95 % and the costs for research and development may be offset against the patent box revenues for a maximum of 5 years. Otherwise, the Commission has not dealt more explicitly with the State Council's proposals.
The State Council of the Canton of Schwyz is starting the consultation process on the implementation of the SV17 / TRAF and on the subsequent amendment of federal law, which is to last until 10 July 2018. In doing so, it is sending both implementation variants envisaged on 7 December 2017 into consultation: In the case of the tax rate reduction variant, the tax rate for corporate profits is to be reduced to 2 % and the minimum tax rate for capital tax to 0.03 ‰ (from today 0.4 ‰). For the total tax rate variant, a tax rate of 5.8 % for income tax and of 0.07 ‰ for minimum tax applicable throughout the entire canton is to be introduced. An additional deduction of 50 % is planned for research and development and a relief of 90 % for income from patents. In this context, the State Council emphasises that the cantonal implementation of the SV17 will be financeable without an increased general tax burden on natural persons. The minimum taxation of 70 % for dividends required by federal law (in contrast to 50 % today) will also generate additional income for the canton as financial support for the SV17. This primarily affects the provisions on withholding tax, tax remission and criminal tax law as well as the taxation of legal entities for immaterial purposes. The consultation period lasted until 10th of July 2018. No results from this consultation are available at the moment.
The government of the Canton Schwyz wants to strengthen the canton's economic area with a mix of tariff measures and other actions. Thereby, the best possible conditions can be created for keeping the status companies in the canton, which have enjoyed tax privileges so far, and for attracting new companies to the canton. The cantonal government has instructed the Department of Finance to draw up a proposal for the cantonal implementation of the Steuervorlage 17 / TRAF. Two versions are being developed: One option is to lower the profit tax rate from 2.25 % to 2.00 %, which would reduce the effective tax burden (incl. direct federal tax) for corporate profits of legal entities by 4.5 % to 6 % in all municipalities. The other option is to introduce an overall corporate profit tax rate applicable throughout the canton in order to eliminate the strong tax differentials (tax disparities) that exist in the canton today.
The Department of Finance of the canton of Schwyz supports the new key points of the Steuervorlage 17 / TRAF in general. The implementation of the SV17 shall be used to render the canton as a whole more attractive for companies, possibly by introducing a uniform profit tax rate for the whole canton.
Canton of Solothurn
After the unfortunate initial situation shortly after the Solothurn electorate rejected the revision of the cantonal tax legislation, the State Council adopted a new proposal at the beginning of July 2019 with a message to the cantonal parliament. Contrary to the original proposal, the profit tax rate is to be reduced to only 16 % instead of 13 %. Meanwhile, the capital tax rate remains unchanged at 0.8 ‰. Nothing has changed regarding the complete granting of the deduction for the patent box and for research and development. Regarding the measures for natural persons, nothing has changed since the message on the first proposal of 4 April 2018. In order to achieve legal certainty, the proposal of the State Council will be put to the vote before the Solothurn electorate on 15 December 2019. This should enable the simultaneous entry into force of the cantonal and federal bill on 1 January 2020.
In addition to the federal vote, the citizens of Solothurn also dealt with the cantonal implementation of the same. The decision was rather narrow. With 51 % and 49 % respectively, the canton rejected the revision of the Tax Act. It will now be up to the cantonal government and parliament to draw up and submit the next proposals.
After the consultation period had expired, the State Council of the Canton of Solothurn dealt with the rele-vant submissions and adopted the bill for submission to the cantonal parliament on 20 December 2018. Compared to the consultation draft, the State Council does not intend any significant changes. Only the dividend tax is now to be set at 70 % instead of 75 %. In addition, an agreement on financial compensation was reached with the municipalities. Now the tax losses of the municipalities are to be fully compensated in the first year after entry into force.
The State Council of the Canton of Solothurn is sending the bill for the implementation of the Steuervorlage 17 / TRAF into consultation, which lasted until 31 August 2018 (see communication on the results of the consultation process from 20 December 2018). Thereby, it adheres to the key figures presented on 4 April 2018. In addition to the increase of CHF 30 / month in the minimum rate for family benefits planned under federal law or the increase in AHV contributions brought into play by the Council of States, it calls for further accompanying compensation measures in the social and education sectors.
The State Council has set the parameters for the implementation of the Steuervorlage 17 / TRAF, largely following the approach agreed upon by the social partners and municipalities in February 2018. The profit tax rate shall drop from over 21 % today to around 13 %. At the same time, the capital tax is to be reduced from 0.8 ‰ to 0.1 ‰. The State Council also intends to fully grant the patent box and the additional deduc-tion for research and development expenditure proposed by the Federal Government. In the area of natural persons, however, the cantonal dividend taxation is to be increased not only to 70 %, but to 75 %. In addi-tion, the cantonal wealth tax is to be increased from 1.0 ‰ to 1.4 ‰ for taxable assets surpassing CHF 1 million. People with low income and families are to be disburdened and the communities' losses in tax revenue partially compensated. However, Landammann Roland Heim also confirmed that new austerity measures will be needed to finance the tax bill.
The Canton of Solothurn Trade Union Confederation, the Solothurn Cantonal Trade Association, the Solothurn Chamber of Commerce and the Association of Solothurn's Municipalities have explored and substantiated the framework communicated by the government on 2 February 2018. They have agreed on a new ordinary tax rate for legal entities of 12.9 % and, additionally, companies are to be granted the full patent box proposed by the federal government and the additional deduction for research and development expenditure. In order to counter-finance the lower tax yields, the social partners and the municipalities have agreed to increase the cantonal dividend tax to 70 % and the cantonal wealth tax from 1.0 to 1.4 per mil for taxable assets of over CHF 1 million for natural persons. Additionally, they propose a location tax, which is levied exclusively from legal entities and which, in addition to a minimum basic fee, is only payable by companies which tax profits. In addition to the competitive tax strategy, various measures were agreed upon: more support for families, an IT education offensive and easing the burden on small incomes.
The governing council of the Canton of Solothurn intends to lower the income tax rate to between 13 and
16 % in order to remain competitive. In addition, it intends to make full use of the relief possibilities offered by the new instruments provided for by federal law (patent box and additional deduction for research and development expenditure), but with a relief limit of 50 %. The partial taxation of dividends from significant shareholdings is to be increased to 70 % or, given a very low profit tax rate, to 75 % at most. As further contribution to the counter-financing measures, a moderate increase in wealth tax is under consideration. The municipalities' loss of income is to be compensated for with benefits from the canton in the amount of CHF 15 to 45 million and, in the social and education sector, accompanying measures such as the financing of family benefits or IT education measures shall also be used.
Canton of St. Gallen
The Cantonal Council adopted the cantonal bill in its February 2019 session, which will enter into force in the Canton of St. Gallen on 1 January 2020 after the referendum deadline expires on 23 April 2019 and with the adoption of the bill at national level. The following parameters are to be implemented in future: A reduction in profit tax to 14.5 %, a 40 % deduction for research and development and a 50 % deductibility for patent box revenues. Furthermore, the government has ordered the implementation of the supplement to the Introductory Act to the Federal Act on Family Allowances. This will increase the child and education allowances by CHF 30. These now amount to CHF 230 for children and CHF 280 for young people in training. Due to the increase in training allowances, the canton would also like to use the additional tax revenues for childcare to supplement family- and education-related childcare in order to promote this further. The Federal Department of Home Affairs is currently also drafting a bill to this effect. The bill will be submitted to the Cantonal Council in 2020 at the latest.
As part of the adoption of the budget for the attention of the cantonal parliament, the government once again outlined the parameters of the implementation of the Steuervorlage 17 / TRAF and took up a position for the consultation process. Furthermore, some changes in the assessment of natural persons were addressed. The aim is to increase the insurance premium deduc-tion to CHF 950 per year in favour of natural persons. The consequence of this increase is a total tax relief of CHF 25 million per year. The increase in the premium reduction volume represents a second relief mea-sure.
On 16 May 2018, the cantonal Department of Finance opened the consultation process on the implemen-tation of the Steuervorlage 17 / TRAF in the cantonal territory. She lasted until 9 July 2018 (see communi-cation from 9 October 2018). According to the government, the reduction of the profit tax rate to 15.2 % (2020) and to 14.2 % (2025) remains essential. Other measures include a 50 % deduction for research and development, a 50 % patent box and a 50 % relief limit. In the context of dividend taxation, the partial taxa-tion procedure with a 70 % participation tax is to be introduced instead of the half rate procedure.
The government of the Canton of St. Gallen has announced in a press release that it intends to focus on a reduction in profit tax from 17.4 % to approximately 15.2 % and on tax incentives for innovation in the course of the implementation of the Steuervorlage 17 / TRAF. The government estimates that the shortfall in revenue should not exceed CHF 100 million.
Corporate Tax Reform – what is the canton of St. Gallen doing? Written response by the canton's administration from 28 March 2017
With a view to the coming household planning, there is currently no reason to correct the projections of the task- and finance plan. But the administration will continuously analyse the situation and report back to the Cantonal Council with the budget plan for 2019-2021.
Canton of Thurgau
Following the adoption of the federal bill on 19 May 2019, the Thurgau government adopted the message on the revision of the cantonal tax legislation for the attention of the Grand Council. The cantonal implementation presents itself as follows: reduction of the profit tax rate from 4 % to 2.5 %, patent box with 40 % relief, relief limit of 50 %, adjustment of the capital tax as well as an increase in the possibilities of deducting insurance premiums, childcare costs for third parties and education allowances as compensatory measures for natural persons. The reduction of the partial tax deduction from 40 % to 30 % was dropped. However, an additional deduction of 30 % for research and development costs has been added. The State Council drew a mixed conclusion from the consultation: The views of the interest groups differ widely - there is no homogeneity to be found anywhere.
On 27 April 2018, the State Council of the Canton of Thurgau submitted a bill for consultation. Again, the authority refers to the central concern of the bill - the reduction of the profit tax rate from 4 % to 2.5 %. For legal entities, this means a total tax burden of approximately 13 % to 15 %. The main reason for the reduc-tion is the preservation of competitiveness. Furthermore, the tax rate on shareholdings will no longer be set at 60 % but at 70 %. The consultation process lasted until mid-August 2018.
The government of the Canton of Thurgau is aiming for a total tax burden of around 13-15 % in order to compensate for the abolition of cantonal tax privileges, which requires a reduction of the
current income tax rate from 4 to 2.5 %. The reciprocal financing measure is namely the reduction of the partial taxation deduction from currently 40 % to 30 %. As far as the patent box is
concerned, the cantonal government expects that this measure will not be widely applied, due to the very complex arrangements for claiming the patent box, also on the part of the company. Due to
financial reasons, tax incentives for research and development costs in excess of the full deduction are to be waived. With regard to the capital tax, the government intends to set the tax rate
at 0.15 per mil of the taxable equity. The relief limit shall be set at
Canton of Ticino
The Canton of Ticino has published a message with an analysis regarding the extent to which the Canton of Ticino still has to adapt its cantonal tax legislation to the TRAF bill.
Message of 10 July
The people of Ticino have voted to adopt the cantonal tax and social reform with a wafer-thin majority. This will disburden wealthy individuals and companies, but in return also families, starting in 2020.
The Canton of Ticino will vote on the cantonal implementation of Steuervorlage 17 / TRAF as early as 29 April 2018 because a left-wing committee consisting of the SP, the Greens, the Unia trade union, the Ticino and Moesa sections of the Swiss Confederation of Trade Unions and the Young Socialists of Ticino has taken up the referendum. Following the rejection of CTR III, the cantonal government of Ticino did not want to wait for a solution at federal level and therefore examined a tax reform at cantonal level, which had been approved by the Grand Council in December 2017.
Canton of Uri
In 28 June 2019, the District Administrator of the Canton of Uri decided to implement the TRAF. The voters of the canton of Uri approved the amendment to the tax law on 20 October 2019.
With a message dated 29 March 2019, the State Council of the Canton of Uri requested the cantonal par-liament to amend the cantonal tax legislation. For reasons of location policy, the canton is primarily relying on a reduction in the profit tax rate to 12.6 % instead of the 12.5 % proclaimed in October 2018. Another of the changes to the previously announced key figures is the taxation of dividends. It is projected at 60 %. No changes resulted in the implementation of the other instruments - no research and development costs will be introduced and the patent box is designed to be unattractive with its 30 % relief. The reason for this is that the Canton of Uri, as an NFE (National Fiscal Equalization) beneficiary, does not want to burden itself with more loss of revenue than necessary. All in all, the government's direction is clear: The Canton of Uri shall no longer be regarded as a high-tax canton.
In March 2018, the cantonal Government revealed the key parameters for the cantonal implementation. A central aspect is the reduction of the profit tax burden from 14.9 % to 12.5 %. In order to offset the loss of tax revenue caused by reducing the profit tax burden, dividends shall be taxed at a rate of 70 %. In future, municipalities should be in a position to increase the capital tax rate from 0.01 per mill to a maximum of 4.0 per mill instead of only 2.4 per mill. As far as the implementation of the other instruments is concerned, the canton appears more cautious: the obligatory patent box is to be designed unattractive with a deduction of only 30 %, and there will be no deduction at all for research and development. Overall, the tax relief should be limited to a level of 50 %.
Canton of Vaud
The canton of Vaud is no longer waiting for the Steuervorlage 17 / TRAF and will implement its own bill by the beginning of 2019. The voters in the canton of Vaud had already accepted the cantonal implementation of CTR III with a clear majority of 87.12 % on 20th of March 2016. Therefore, Vaud will reduce corporate taxes from 20.95 % (2018) to 13.79 % (2019) without waiting for compensation payments from the federal government. The canton of Vaud thus chooses a different path than the majority of the other cantons, which wait for the Steuervorlage 17 / TRAF after the CTR III was rejected on the federal level.
Canton of Valais
The State Council announced its strategy for the cantonal implementation of the TRAF bill. The profit tax rate is to be reduced from 12.66 % to 11.89 % in the first stage and from 21.56 % to 16.98 % in the second stage. The taxation of dividends from private holdings is to be maintained at 60 % and research and development shall be awarded additional incentives.
Already in March of this year, the Valais State Council reported on the cantonal implementation of the Steuervorlage 17 / TRAF at a media conference. Basically, the canton of Valais, with its few Status companies, is only minimally affected by the SV17. Due to the wide reductions in profit tax rates throughout the cantons, the State Council finds itself forced to also reduce its tax rates in order to maintain tax competitiveness. Therefore, a central element of the implementation shall be a reduction of the profit tax rate from 21.56 % to 15.61 %. The resulting loss of tax revenue is to be compensated by a statutory increase in municipal tax rates from 1.25 per mill to 1.7 per mill. Further measures include a maximum deduction of 90 % within the framework of the patent box on one hand and 50 % deductions for research and development costs on the other. Overall, however, only 34 % are deductible. The canton complies with the social compensation and plans to increase tax deductions for premiums and contributions from health insurance funds and for third-party child care costs.
Canton of Zug
With the outcome of the federal vote on the Steuervorlge 17 / TRAF, the State Council of the Canton of Zug also commented on the cantonal implementation of the bill. It emphasised once again how the attractive design of the bill benefits the canton, from a national and international perspective. At that time, the cantonal parliament had already carried out a first reading of the message/proposal. The second reading took place on 27 June 2019 and resulted in 54 votes to 18 in favour of the bill.
The government of the Canton of Zug submits a partial revision of the Zug Tax Act in accordance with the Federal Act on Tax Reform and AHV Financing (TRAF) to the Cantonal Council. For the Canton of Zug, this represents a revenue-neutral tax restructuring that is not intended to affect natural persons in the Canton of Zug. While certain changes will lead to additional revenue, other areas are likely to suffer from a shortfall in revenue, so that the combination of the two will more or less balance each other out. The future profit tax level should be around 12% with the aim of ensuring that the Canton of Zug will remain an attractive location for companies.
The State Council of the Canton of Zug is sending the cantonal implementation of the Steuervorlage 17 / TRAF into consultation, which will last until 13 July 2018. At the same time, various changes in federal tax legislation will be incorporated into cantonal law. After the consultation, the Cantonal Council will discuss the legislative amendments until the end of June 2019. A possible referendum would take place in November 2019, so that the revised law could come into force at the beginning of 2020. A uniform profit tax rate of approximately 12 % and targeted tax relief, in particular through a patent box and support for research and development, will continue to make Zug attractive for both companies and private individuals. The SV17 is to be revenue-neutral in the Canton of Zug and no tax burdens are to be redistributed from companies to private individuals.
The Finance Directorate of the Canton of Zug welcomes the Federal Council's message on the SV17 / TRAF. The Canton of Zug will be able to carry out the implementation into cantonal law in the way it has already communicated in the past. The increase in the minimum rate for child and education benefits to CHF 230 is not relevant for the Canton of Zug, because the minimum rate is already higher in Zug today.
The State Council of the Canton of Zug welcomes the rapid action of the Federal Council and is of the opinion that the SV17 / TRAF represents a well-balanced overall package. However, it proposes to increase the cantonal share of direct federal tax to 21.2 % and also advocates allowing the cantons to introduce an optional deduction for self-financing. The implementation of the SV17 is to be carried out revenue-neutral in the Canton of Zug and without shifting any tax burden from companies to private individuals. The State Council is expected to open the consultation process on the cantonal implementation bill in April 2018 with the consultation period lasting until the summer holidays in 2018, and the Zug Cantonal Council will then discuss the bill in the first semester of 2019 with regard to its entry into force by 2020.
Financial director Heinz Tännler supports the propositions of the Federation's steering body for the Steuervorlage 17 / TRAF. The canton of Zug plans a uniform profit tax rate of about 12 % for all companies. Furthermore, a patent box with a cantonal fiscal discharge of 90 % shall be introduced and research and development shall be supported with a cantonal discharge of 150 %.
Canton of Zurich
The Steuervorlage 17 / TRAF was adopted on 1 September 2019 with 56% votes in favour. Despite a low turnout, the centre-right parties managed to revise their tax legislation in such a way that as few companies as possible would consider leaving the canton, which would result in job losses.
At a media conference held by the Zurich government on 2 August 2019, the cantonal implementation of the Steuervorlage 17 / TRAF was explained once again. This conference was given with a view to the vote held on 1 September 2019.
No April fool's joke was the approval of the new Zurich Tax Act by the cantonal parliament. On Monday, April 1, 2019, the Conservative parties pushed through the bill after a heated debate under protest from the left-wing party and the Greens. Criticism was voiced by the opponents, who denounced the extensive use of all loopholes for tax cuts. The majority of the new tax law was drafted by Finance Director Ernst Stocker. The central issue is the reduction of profit taxes from 8 to 7%. Deductions for self-financing, equity capital, re-search and development and a dividend tax of 50 % are favourable side effects. The mandatory referendum is expected to take place in September 2019.
The State Council has submitted a proposal for a tailor-made cantonal implementation of the Steuervorlage 17 / TRAF to the Cantonal Council, which also considers the needs and concerns of the cities and municipalities. In order to remain attractive for companies that are currently subject to special taxation (holding companies, financing companies, etc.), the cantonal government plans a moderate and gradual reduction in the profit tax rate from 8 to 7 % (one year after the SV17 comes into force) and from 7 to 6 % two years later. In the end, this would reduce the total tax burden for companies based in the Canton of Zurich from 21.15 % today to 18.19 %. In addition, companies should be able to benefit from the self-financing deduction, a deduction for research and development and a patent box. The canton will distribute almost 200 million Swiss francs to the municipalities so that they can offset the loss in tax revenue due to the corporate tax reform. The aim is that the population of Zurich will not have to reckon with a tax increase. However, it remains to be seen how the parties will position themselves regarding the cantonal tax Reform.
In a media release, the tax office of the Canton of Zurich informed that it has added a note to the practice definition regarding the transition from taxation as a holding, domicile or mixed
company to ordinary taxation (change of status): According to current practice, hidden reserves not affecting income tax, disclosed as a result of the change of status, are subject to capital tax
according to § 79 para. 1 StG. The amended practical note now states that the
recording of these reserves in the taxable equity will cease with the entry into force of the federal act concerning the Steuervorlage 17 / TRAF and the associated repeal of
§ 79 para. 1 sentence 2 StG.
Both the city and the Canton of Zurich are disappointed that the Federal Council has removed the interest-adjusted profit tax from the Steuervorlage 17 / TRAF. Although it had become likely that the interest-adjusted profit tax will no longer be included in the package, Ernst Stocker, Zurich's Financial Director, is disappointed nevertheless. A weakened Canton of Zurich has adverse effects on the whole of Switzerland when it comes to the national financial equalization. But because the interest-adjusted profit tax was one of the major "stumbling blocks" of the CTR III, the Federal Council probably didn't want to take any risks by reintegrating it into the new Steuervorlage 17 / TRAF.
The Canton of Zurich and its municipalities have agreed on a common position regarding the new corporate tax reform and could thus bring a new dynamic to the implementation of the Steuervorlage 17 / TRAF. The "Zurich compromise" contains the equity interest deduction demanded by the canton. To this end, the canton has not only promised the municipalities additional funds, but has also halved the planned reduction in the general profit tax rate for the time being.
The Canton of Zurich wants to find a common position with municipalities and economy on the Steuervorlage 17 (SV17) / TRAF and has extended invitations to a round table. As the canton informs, it is not yet possible to report any results, but all those involved wanted to continue searching for a common denominator. In December, Zurich has to comment on SV 17 in Berne and demonstrate how it is to be implemented at cantonal level.
Even though the Federal Council has dropped the equity interest deduction from the reform package with its resolution on the key points of the Steuervorlage 17 / TRAF in June, the canton of Zurich doesn't want to abandon the fight just yet. According to a survey conducted with corporations at the behest of the Zurich Chamber of Commerce (ZHK), the equity interest deduction could get the canton substantial additional revenues on balance. Therefore, the Zurich Chamber of Commerce wants to work towards finding allies, which support the concerns of the Canton of Zurich, in other cantons and associations in the months to come.
Additionally, Zurich's cantonal tax authority has published practical directions regarding the change of status of holding, domiciliary and mixed companies on the 28th of August 2017: Practical directions regarding §§ 73 und 74 StG ZH and complement to the practical directions.