Swiss Corporate Tax System: A Reformed Approach for the Benefit of Companies
Switzerland has long been known for its favorable business environment that attracts many international companies to set up their headquarters in the country. However, the country's previous corporate tax system, which offered preferential tax rates to certain companies, was considered as harmful by the international community. In response, Switzerland took the initiative to reform its corporate tax system in 2019, which is set to benefit companies in the long run.
The Old System: The Problem
The previous corporate tax system in Switzerland was made up of two levels: federal and cantonal. Under this system, certain cantons offered lower tax rates to companies, which led to some international companies shifting their profits to these cantons. This practice was known as 'ring-fencing' and was criticized by the international community, which believed that such preferential treatment gave an unfair advantage to the companies taking advantage of it and created an uneven playing field for all companies.
Reforming the System: The Answer
The Swiss government took multiple steps to reform its tax system. The first step was to abolish the preferential tax treatment of certain cantons. The second step involved offering alternative tax incentives, such as an R&D tax credit and a patent box system. These measures aimed to encourage innovation and attract companies with intellectual property to the country.
The third step was to introduce a new level of taxation, applicable to all companies, known as 'patent box 2.0.' This new regime offers a reduced tax rate on profits generated from intellectual property. This rate is much lower than the standard corporate tax rate, making it an attractive proposition for companies looking to invest heavily in research and development and other intellectual property-related activities.
The Benefits of the New System
The new Swiss corporate tax system offers several benefits to companies. Firstly, it creates a more level playing field for all companies operating in Switzerland, with no preferential treatment of certain cantons. Secondly, it incentivizes innovation by offering more attractive tax incentives, such as the R&D tax credit and patent box system. Lastly, the 'patent box 2.0' offers a lower tax rate on profits generated from intellectual property, which is sure to attract more companies to set up their R&D centers in Switzerland.
The Bottom Line
In conclusion, the reform of the Swiss corporate tax system is a positive step forward for companies operating in Switzerland. The new system offers a more level playing field, incentivizes innovation, and offers a lower tax rate for companies investing in R&D and intellectual property-related activities. This reform is sure to attract more international companies to set up their operations in Switzerland, further strengthening the country's position as a global business hub.
