Swiss corporate tax reform passed at referendum
After an initial rejection in February 2017, on 19 May 2019 the Swiss public voted to pass new corporate tax reforms which are scheduled to enter into force in January 2020.
The reforms include the abolition of tax privileges for companies that operate predominantly internationally (“holding” and “mixed” companies). In response to this change a majority of cantons have decided to reduce their corporate income tax rates. This includes the canton of Geneva where the corporate income tax will fall from 24.2% to 13.99%.
In order to remain an attractive business location the Swiss Government included several measures in the reforms, in particular the promotion of investments in research and development (R&D). The major elements of the reforms are:
- Abolition of cantonal tax privileges
- Implementation of patent box
- Additional deductions for R&D
- Deductions for self-financing
- Relief restrictions
- Capital tax adjustments
- Disclosure of hidden reserves
- Extension of the flat-rate tax credit
As a central element of the reform, and currently only applicable at the cantonal level, privileged tax regimes will be abolished. Faced with this major change, and the potential risk of losing corporate taxpayers, many cantons have presented their own corporate tax reform, mainly by proposing to decrease the rate of corporate income tax.
Geneva voted on the cantonal reform and accepted it. The reform provides for the reduction of the corporate income tax from 24.2% to 13.99%. This new rate is compatible with international standards and will help Geneva to remain attractive to investors, both on an international and national level. The canton of Vaud had already voted to reduce the corporate income tax in 2016 and has implemented the new tax rate since January 2019.
In Zurich, a vote will take place in order to validate the decrease of the corporate income tax rate which should be gradually reduced from 21.1% to 18.2%. Despite this decision, the canton of Zurich will have one of the highest corporate income tax rates in Switzerland.
| Cantons | CIT Rate |
| Geneva | 13.99% |
| Vaud | 13.79% |
| Valais | 11.89% - 16.98% |
| Zurich | 18.2% |
| Zug | 12.3% |
| Schwyz | 12.5% - 14.4% |
The 12% threshold has established itself as the lower limit for corporate income tax.
With the approval of the Federal Tax reform, Switzerland may improve its relations with the EU and the OECD and hope to be deleted from the “grey list” of countries that are being reviewed by the EU and given time to reform their tax standards. The abolition of the privileged tax regimes and the implementation of new income tax rates (by some cantons) will be in accordance with international tax standards whilst also ensuring that Switzerland remains competitive with other Europeans countries.
