Tax Proposal 17 – Part 2: Status Companies and Patent Box

In the first part of our series on the tax proposal, we explained why Switzerland needs a reform in the area of corporate taxes. The Federal Council has now adopted the message with the draft law. In this and the following parts of the series, we will discuss the individual measures of Tax Proposal 17.

Abolition of regulations for cantonal status companies

‍So-called cantonal status companies are companies that have their headquarters in Switzerland but generate most of their revenues abroad. This includes holding, domicile, and mixed companies. Examples include Adecco, Google, or Nobel Biocare, which have headquarters in Switzerland. According to the Federal Council, in 2003 there were over 20,000 such companies with at least 150,000 employees; today there are probably more. The activities of these companies directed abroad hardly burden the Swiss infrastructure, which is why they benefit from low taxation. However, these regulations no longer meet international standards, which poses a legal and planning uncertainty for cross-border companies. With TP17, these regulations will be abolished. The consequence would be higher taxation for status companies, in many cantons even more than doubling. To reduce the burden on this extremely important economic sector of Switzerland, various cantons have already announced that they will lower their ordinary tax rates.

‍Patent Box

‍With a patent box, profits from products based on patents are taxed less than other income. Consequently, this promotes research and development. Our European environment has known the patent box for years, and the EU and OECD also accept it. Only Switzerland has not yet acknowledged it. With TP17, this is now set to change, as it aims to introduce a mandatory patent box. How strong the tax advantage on profits of this type should be, however, is at the discretion of the cantons. You will learn about further measures with the tax proposal 17 in the next part of our series.

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