November 20 2018

Federal Tax Administration announces changes on federal practices concerning principal companies and Swiss finance branches

Source: IBFD Tax Research Platform News

On 15 November 2018, the Swiss Federal Tax Administration (FTA) announced that in the course of the corporate tax reform, it will no longer apply the federal practices concerning principal companies and Swiss finance branches to new companies from 2019.

The corporate tax reform (Tax Proposal 17) introduces legislative measures to bring Swiss corporate tax law in line with international requirements. Tax Proposal 17 provides, inter alia, for the abolition of arrangements for cantonal status companies. Correspondingly, the FTA will abolish the federal practices on tax allocation for principal companies and Swiss finance branches in parallel to the abolition of the rules concerning cantonal status companies. Unlike the rules concerning cantonal status companies, the abolition of federal practices does not require any legislative amendment. As a first step, the FTA will therefore ensure that federal practices are no longer applied to new companies from 2019. With the entry into force of the Tax Proposal 17 at the beginning of 2020, the federal practices for existing principal companies and Swiss finance branches will also be abolished.