7th Global Headquarters Conference Swiss Tax Update in the international context

Transcription

1 Tax and Legal Services 7th Global Headquarters Conference Swiss Tax Update in the international context Welcome!

2 Your Speakers Armin Marti Partner, Leader Corporate Tax Switzerland Direct: Mobile: Martina Walt Partner, Tax and Legal Services Direct: Mobile:

3 Content OECD BEPS Transparency Reputation EU Tax Developments Substance Tax harmonization and competition EU black list project US Tax Reform 3

4 Overview Global Tax Developments Governme nts & Multinatio nals 4

5 BEPS is just the beginning The trend is clear: Coherence Improving interaction of corporate tax in different territories, alignment of tax rules Substance Realignment of taxation and substance Transparency Increased visibility and sharing of tax-related information EU ATAD I/II EU State Aid BEPS C(C)CTB Public CbCR Tax Good Governance Code of Conduct Group Exchange of information 5

6 Timeline UK Hybrids Interest cap ATAD-I Directive Australia DPT Australia Hybrids Brexit? Swiss Tax Proposal 17 ATAD I + II Hybrids + exit tax OECD BEPS ATAD-II Directive MLI signed ATAD I CFC rules, GAAR + interest cap** ATAD II Reverse hybrids German elections **Interest cap may be deferred until 2024 if equally effective rules in place 6

7 Overview of the TP 17 measures Cantonal rate reductions Tax Proposal 17 Abolition of tax regimes (holding, mixed, domiciliary, principal and finance branch regimes) Mandatory cantonal Patent Box according to OECDstandard Optional cantonal R&D superdeduction (max. 50%) Current cantonal step-up practice and tax effective depreciation of hidden reserves (max. 10 years; DTA) Separate taxation of formerly tax free hidden reserves (during 5 year transition period) Adaption of cantonal capital tax base for participations and patents Increase of partial taxation of private dividend income Federation: 70% Cantons min. 70% Increase of cantonal share in direct federal tax revenues from 17% to 20.5% Increase of children and education allowances by CHF 30 No longer included: NID Deferred: Maximum limitation of reliefs of max. 70% Abolition of issuance stamp tax Basis: Legal certainty & investment security 7

8 Swiss Tax Package 17 Comparison of cantonal income tax rates Position of cantons prior to CTR III popular vote 25% 20% 15% Target rate 12% Mixed Company rates today 10% Very different starting points per canton Due to 70% maximum relief provision all regime companies will pay a little more 5% ETR 2017 (effective) then today! Maximum possible Target ETR pre relief CTRIII depends vote (if already on announced) extent of R&D activities carried out within Switzerland Tax rate in case of 70% relief limitation 0% ZG LU SH NW OW SO BS AR TG GE VD FR BL AI UR SG SZ NE GL GR TI BE ZH AG JU VS 8

9 Swiss Tax Package 17 Treatment of previously tax free hidden reserves and goodwill Statutory profit Step-up deprec. According to current cantonal tax practice From now until effectiveness of TP17 Tax free step-up with subsequent tax effective amortisation (max. ten years); DTA effect 0 Taxable profit Maximum relief limitation of 70% (or lower)! According to new draft tax law As of effectiveness of TP17 five years with separate (low) tax rate; no DTA effect How does an optimal transition to ordinary taxation look like given specific facts of your entity? How does the interaction between the treatment of hidden reserves and an entry into the Patent Box work given specific facts of your entity? 9

10 Swiss Tax Package 17 web based Step-up-Calculator Yesterday Today was all about spreadsheets. is all about apps This is why is proud to introduce the Step-up Calculator. This app was developed jointly by our Swiss Corporate Tax, Valuation and Digital experts. It offers: A free-of-charge estimation of your company s step-up potential and On request, a paid report validated by our Valuation specialists that can be used a basis for the discussion with the Tax Administration at your fingertip, on your desktop or tablet just like you re used to with modern web-based applications. But see for yourself: 10

11 Spontaneous exchange of information Swiss Ruling Exchange 2016 Rulings which are effective to be disclosed in TP Masterfile/Local File Jan 1, 2017: Coming into force Jan 1, 2018: Exchange of information ff. Principle: First application of spontaneous information exchange of tax rulings as of Jan 1, 2018 TP 17 effective? Abolition of preferential Swiss tax regimes Signed rulings retroactive from 2010, as long as still applicable in

12 Recent EU BEPS Developments Anti tax avoidance Directive I Interest deductibility Exit tax GAAR CFC rules Hybrid mismatches Amendments to the administrative cooperation directive to implement CbCR Recommendations to EU member states on how to reinforce their tax treaties in an EUlaw compliant manner External strategy for effective taxation for working with third countries on tax good governance Anti tax avoidance Directive II CCTB/CCCTB Published on October 26, 2016 State aid Ongoing EU Commission state aid investigation, e.g. Apple, Starbucks, Fiat. 12

13 BEPS implementation in Switzerland Key aspects Action Comments 3 (CFC) No CFC rules at this stage and no plans to introduce CFC regime 4 (interest deductions) 5 (harmful tax practices) 6 (prevent treaty abuse) Current Swiss thin cap rules are seen as being sufficient to counter unreasonable interest deductions. No plans to introduce further limitations (e.g. fixed/group ratio rules) Current harmful tax practices (Federal/cantonal tax regimes) will be abolished with CTR III Legislative framework for spontaneous exchange of tax rulings from FY 2018 implemented PPT or LOB clauses are included in current Swiss double tax treaties Multilateral instrument (MLI): Switzerland adapting (narrow) PPT option which shall be applied to all Swiss double tax treaties 13 (CbCR) Switzerland signed multilateral competent authority agreement for automatic exchange of CbC reports (from FY 2020) 14 (dispute resolution) Various Swiss double tax treaties already include arbitration provisions MLI: Switzerland in favour of mandatory arbitration provision 13

14 Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion & Profit Shifting ( MLI ) 68 countries signed the MLI at the signing ceremony General theme more complexity and uncertainty! Potentially impacts 3,500 treaties, immediately or as further countries adopt. Many territories have adopted only minimum standards! PPT will be added to all treaties between signatories (as interim measure even if LoB long term) 7 territories prefer detailed LoB - Canada, Chile, Colombia, Kuwait, Poland, Senegal, Seychelles. Dependent agent PE changes not adopted by many more DPT rules likely? Timing depends on ratification process effective 3-4 months after (5 th ) ratifying instrument deposited 14

15 US Tax Reform and its impact on Swiss tax Camp 2014 Proposal (H.R. 1) Reduction of corporate income tax rate from currently 35 % to 20% Republican Blueprint Trump / Joint Proposal Elimination of most / many special exclusions and deductions / R&D tax incentives remain applicable USA: Competitiveness? CH: Group structures? Immediate write off of new investments (if made after ) applicable for at least 5 years Partial limitation of net interest expense deductibility Swiss Considerations Change to territorial tax system (dividend income 100% tax free, 10% shareholding required) Deemed repatriation of foreign profit upon change to territorial system No «Border Adjustments» Tax Individual tax rate reduction to support middle class Impact on global strategy? Impact on IP? 15

16 THE END? Increased complexity of tax function (frequency of changes, international alignment and coordination, central control) Exit from non-acceptable structures, defense of tax positions, avoidance of double taxation Compliance and transparency rules, IT and big data Tax Active Tax Risk Management, establish Tax Control Frameworks including communication strategy Expected group tax rates, KPI and lobbying for business friendly tax rules 16

17 Thank you This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers AG, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it All rights reserved. In this document, refers to PricewaterhouseCoopers AG which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.