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Federal Council aims to strengthen Swiss debt market through tax reform

During its meeting on 3 April 2020, the Federal Council initiated the consultation on amendments to the Withholding Tax Act.

The debt market in Switzerland is to be strengthened by means of a tax reform. In addition, the Federal Council wants to close a loophole in the withholding tax system.

What’s proposed ?

The Federal Council is proposing to exempt domestic legal entities and foreign investors from withholding tax on interest-bearing investments. This will enable corporate groups to issue their bonds in Switzerland without withholding tax hurdles.

Technically speaking, this involves a partial switch to the paying agent principle (the current applicable system being the debtor principle).

As a rule, banks would thus levy the new withholding tax in the future. As a complementary measure, the transfer stamp tax on domestic bonds is to be abolished.

At the same time, the switch to the paying agent principle will also close a loophole with regard to individuals in Switzerland and make income from foreign interest-bearing investments subject to withholding tax.

What consequences ?

It is estimated that the new withholding tax will lead to a one-off reduction in receipts of CHF 750 million. However, this has no budgetary impact, as provisions have been set.

The reform means that bonds previously issued abroad can now be issued in Switzerland. There is also the possibility that more intragroup financing activities will be located in Switzerland, which will strengthen the Swiss debt market

This reform should aim Switzerland to strengthen the Swiss debt market.  

For further information, please contact Laure Cordt-Møller at or on +41 (0)22 591 18 90.

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