Switzerland: Retirement: Compliance: Swiss Federal Parliament Adopts Tax Proposal 17

Many thanks to Asinta’s Swiss Partner, Pittet Group, for providing this article.

The goal of Tax Proposal 17 (PF17 / SV17) is to achieve international acceptance of Swiss corporate taxation. The amendments will particularly affect the Federal Act on Direct Federal Tax and the Tax Harmonisation Act, and include the abolition of the cantonal tax status, which is privileged taxation as a holding company, mixed company, or domicile company. 

Both chambers of the Swiss Federal government approved the bill by clear majorities on September 28, 2018. Should a referendum take place, the public vote on Tax Proposal 17 and Swiss social security’s (AVS/AHV*) financing package will be held on May 19, 2019.

Tax Proposal 17 provides compensation in the AVS/AHV for tax revenue losses. Thus, the AVS/AHV would have about 2.1 billion additional Swiss francs (CHF) per year for it’s financing. This supplement would lower the need for additional resources to about CHF 23 billion until 2030.

The increase in Value Added Tax (VAT) would be lower by 0.7% instead of 1.5%, thanks to the additional income AVS/AHV receives thanks to Tax Proposal 17. This revenue would come from an increase in employee and employer contributions, a contribution from the Federal State, as well as the allocation to the AVS/AHV of the entire demographic percentage of VAT.  

* The old-age and survivors’ insurance (AVS = assurance-vieillesse et survivants / AHV= Alters- und Hinterlassenenversicherung) and the invalidity insurance (AI/IV) together form the 1st pillar of Swiss social security. The pensions paid out by both schemes are intended to cover basic living costs.