Tax policy – in line with international standards

Swiss five franc coins
Swiss five franc coins © FDFA, Presence Switzerland

After having settled the dispute on corporation tax in 2014 and the conclusion of the agreement on the automatic exchange of information (AEOI) in 2015, the relations between Switzerland and the EU in regards to taxation are more relaxed and back to normal. The AEOI agreement between Switzerland and the EU has entered into force as of 1st of January 2017, the first automatic exchange of information occurs in 2018. This is in line with the new OECD standard. Switzerland is looking into a reform of company taxation in order to meet and implement international standards.

Automatic exchange of information

Since 2005 Switzerland has already transferred over 3 billion euro to the member states under the provisions of the agreement on the taxation of savings. In 2017, this agreement was replaced by the agreement on automatic exchange of information on tax matters, concluded in 2015. The latter is not only covering interests, but also dividends and other capital income and it doesn’t only affect bank accounts, but also foundations and trusts. Thereby, the new global OECD standard will be applied.  The AEI agreement is based on reciprocity, i.e. when exchanging account information, EU member states have the same obligations to Switzerland as Switzerland does to the EU member states.

Corporate taxation

In October 2014, Switzerland and the EU agreed that Switzerland would abolish several tax regimes which are considered by the EU as distortive to competition.  The EU on the other hand was willing to waive counter-measures. After the failure of the referendum vote on the corporate tax reform III on 12 February 2017, the Swiss Government has presented as soon as possible a new project in order to abolish several tax regimes and introduce measures that are compliant with the international standards. This is dealt with by the Parliament. The EU monitors closely whether Switzerland abrogates these regimes quickly.  

With this reform, Switzerland implements the new international OEDC standard which was decided end of 2014 in the framework of the BEPS project (Base Erosion and Profit Shifting). Unjustified tax avoidance and profit shifting of multinational companies should be avoided by applying this standard. This standard also allows business locations to have the same conditions when it comes to tax bases.

The EU has also decided in 2015 and 2016 rules to implement OECD standards. The EU wants to consciously play a leading role and in some instances even go beyond the standards. By taxing foreign-controlled companies, this can lead to a discrimination of third countries; a point that Switzerland has several times raised and criticized in regards to the EU and its member states. The implementation of the new EU measures in the member states (until 2019) has to prove that this discrimination can be avoided. However, other EU tax projects that could have significant effects on Switzerland are also being monitored closely. These include, for example, the planned financial transaction tax, the common consolidated corporate tax base (CCCTB), the revision of the value added tax and the taxation of the digital economy.

Anti-fraud agreement

The anti-fraud agreement of 2014 improves the collaboration between Switzerland and the European Union (EU) and its member states  in regards to combatting smuggling as well as other crimes related to indirect taxation ( for example custom duties, value added taxes and excise duties). It has not come into force as Ireland hasn’t ratified yet, but it is being provisionally applied by most of the member states since 2009.