Zug fiscal reform 2017

On the 1st of June, the Federal Steering Committee announced its proposals for a new tax regulation 2017, i.e. the Swiss corporate tax reform, that will implement a standard corporate tax rate of approximately 12 percent, without any significant financial losses for the canton of Zug, municipalities, companies and private individuals so that the tax burden will not be shifted to private tax payers. This aims to make Switzerland’s tax system acceptable again on an international level and to revoke the tax privileges granted to certain internationally operating companies.
Following the Swiss electorate’s rejection of the Corporate Tax Reform III (CTR III) on 12 February 2017, the need to clarify the economic and taxation framework conditions for internationally operating companies from Zug (but not limited to) to improve planning security and legal certainty. Therefore the Steering Committee based its proposals on the structure of the Corporate Tax Reform III approved by Zug’s electorate, without omitting the issues and concerns voiced prior to the referendum, such as a new increase of the minimum amount for child and education allowances. The Finance Director Tännler confirms that they « still plan to implement the tax reform in the Canton of Zug without noteworthy financial losses for the canton and municipalities and without passing on any extra tax burdens to private tax payers. »
 
Some of the most important changes refer to:
1.Standard corporate income tax rate of approximately 12 percent for all companies;
2.Introduction of a patent box with a cantonal tax relief of 90 percent;
3.Research and development to be promoted with a cantonal tax deduction of 150 percent. The maximum discharge shall equal 70 percent of net profit.
4.The taxation of qualifying dividends shall have to be increased from currently 50 percent to 70 percent. The Canton of Zug is not affected by the increase of the minimum amount for child and education allowances, as it already has higher amounts in effect.
 
This adjustments are part of the so needed reform of the corporate taxation from the national level. Some of the holding, domicile and mixed companies will be required to accept a moderately higher tax burden and no longer benefit from the privileged tax treatment. But this will lead to a reduction of the corporate income tax rate for all other Zug-domiciled companies from currently 14.6 % to approximately 12 %.
The new Zug’s taxation system is intended to be neutral so that the various additional revenues and revenue shortfalls, including indirect national financial equalization scheme (NFA) impacts, offset each other almost entirely.
 
The consultations for a cantonal implementation are expected to begin in April 2018, so that the amendments can come into effect by 2020. Depending on the progress made on a federal level, the Department of Finance intends to launch the consultation for a cantonal implementation as quickly as possible so that the amendments can come into effect by 2020. A consultation of the tax regulation 2017 in the Federal Assembly is expected in the summer of 2018. Zug’s cantonal government plans to consult on the draft during the first semester 2019 in view of an inception as per 2020.
 
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