What consequences does the Federal Law on Tax Reform and AHV Financing (TRAF) have on corporate taxation and dividend taxation?
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What consequences does the Federal Law on Tax Reform and AHV Financing (TRAF) have on corporate taxation and dividend taxation?

As part of the legislative changes to the Federal Law on Tax Reform & AHV Financing (TRAF), possible effects on the corporate and private tax situation must be examined and measures must be taken when the financial statements are prepared.

The federal law on tax reform and AHV financing (TRAF) was adopted in the referendum on May 19, 2019. The aim of this tax reform is to ensure an internationally compliant, competitive tax system for companies and to strengthen the AHV. The tax reform is intended to preserve the attractiveness and competitiveness of Switzerland as a business location and to secure jobs and medium to long-term tax income. In addition, the submission of the AHV creates urgently needed additional income and thus makes a contribution to securing future pensions.

We summarize the upcoming tax reform at federal and cantonal level as follows:

Federation Canton
Abolition of the tax regime:
Principal companies
Swiss Finance Branch
Abolition of the tax regime:
Holding company
Domiciliary company
Mixed company
Increase in dividend taxation to 70% Increase in dividend taxation to at least 50%

TRAF implementation in the cantons incl. Adaptation of the cantonal tax laws. The individual cantons are currently in the process of issuing the implementing provisions. Different implementations are expected.

Planned corporate income tax rates: 12% – 15% in almost all cantons

Patent box Qualified proceeds from intellectual property rights (patents, copyrighted software and inventions) up to a maximum of 90% are exempt from tax
Research and Development (R&D) In some cases increased tax deductions for R&D
Deduction on self-financing Possible deduction of imputed interest on excess equity at canton level to reduce profit tax (currently only planned in the canton of Zurich).

Tax relief limits on the deductions on the patent box, R&D and self-financing of a total of 70 percent. If the cantonal practice provides for a transitional regulation for status companies, the related depreciation also falls under this relief limit.

Capital tax relief Reduced calculation of capital tax on equity in connection with participations, intangible assets and intercompany loans
Step-up / transitional measures in the event of a change of status Transfer and disclosure of hidden reserves due to the change of status in companies that have previously been taxed at a privileged level. This is done either tax-neutral or by means of taxation at a special rate.

For the sake of completeness, it should be mentioned that the tax reform includes adjustments in the area of transposition, flat-rate tax credit and the capital contribution principle of listed companies.
The AHV financing results in higher social security contributions: The contribution rate of employers and employees is increased by 0.15% each. An increase in VAT rates is also planned as part of the planned reform to stabilize the AHV (AHV 21) by a maximum of 1.5% from 2021.

Implementation in the cantons is well advanced and the tax regimes have been phased out on January 1, 2020 in the following cantons:

Cantons Cantonal corporate income tax rates Dividend taxation
BL 13.5% 60%
BS 13.0% 80%
FR 13.7% 70%
GE 13.99% 70%
GL 12.4% 70%
GR 14.0% 50%
JU 15.0% 70%
LU 12.3% 60%
NE 13.6% 60%
OW 12.7% 50%
SG 14.5% 70%
SH 12.1% 60%
SZ 14.3% 50%
UR 12.6% 50%
ZG 11.9% 50%
ZH 18.2% 50%

Before the tax reform comes into force, the waiver of privileged taxation should be examined. This would have to be done when preparing the 2019 annual financial statements. The remaining cantonal tax laws will be repealed with regard to the tax regime either in the course of 2020 or from January 1, 2021 at the latest. The application of the TRAF will be implemented from January 1, 2020 regardless of the cantonal laws according to the StHG.

Cantons Cantonal corporate income tax rates Dividend taxation
AG 15.1%-18.6% 50%
AI 12.7% 50%
AR 13.0% 60%
BE 21.05% 50%
NW 11.97% 50%
SO 16.3% 70%
TG 13.4% 60%
TI 17.0% 70%
VD 13.8% 70%
VS 11.9-16.98% 60%

The federal law on tax reform and AHV financing (TRAF) has consequences for legal and natural persons. We would be happy to help you with the analysis of your personal tax situation, tax planning measures on the occasion of the preparation of the financial statements and implementation in the area of salary. We support you in questions about the upcoming legal changes and make the necessary calculations for you and support you with necessary adjustments.

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