The Federal Council initiated the consultation on tax proposal 17 (TP17) on 6^th September 2017. The proposal will make a significant contribution to having an appealing location and thus to added value, jobs and tax receipts. The reform will additionally meet international requirements concerning corporate tax law.

TP17 contains several tax measures to maintain Switzerland’s competitiveness. All cantons will introduce a patent box. Moreover, they can grant R&D tax deductions if need be. There are further instruments in addition to those two key ones.

The proposal includes the following key measures:

Abolition of the arrangements for cantonal status companies: At cantonal level, status companies pay only a reduced profit tax or none at all. This preferential treatment will be abolished with TP17. Over taxation will be avoided with a temporary special rate solution.

Patent box: Profits from patents and similar rights will be separated from other profits and taxed at a lower level. The relief may not exceed 90%. The arrangement is based on the current international standards.

Additional deductions for research and development: There may be additional deductions of no more than 50% for research and development. The measure is aimed at domestic research and development.

Relief restriction: The tax relief based on the patent box and additional deductions for research and development may not be higher than 70% of the taxable profit. The calculation also includes amortization based on earlier taxation as a status company.

Increase in the cantons’ share of direct federal tax: The cantonal share will be raised from 17% to 20.5%. CTR III had contemplated an increase to 21.2%. Although this is not directly relevant for companies in Switzerland, it can be argued that this reduced increase is not helpful for the reform, since the cantons will have less scope for reducing their ordinary corporate tax.

Increased dividend taxation: Dividend taxation for natural persons will be increased to 70% at federal and cantonal level. The cantons can provide for a greater increase.

The proposal will put a burden of around CHF 750 million on the federal budget. Furthermore, there is a temporary supplementary contribution of CHF 180 million for the financially weak cantons from 2024 onwards.