Taking effect from 1st January 2020, The Federal Act on Tax Reform and AHV Financing (TRAF) has been approved by Swiss voters to be available in the Cantons. The TRAF is a tax reform procedure providing changes to be made to cantonal tax laws and non-tax laws. The aim of the tax reform is to completely abolish the current privileged cantonal corporate tax regimes and replace them with internationally accepted regimes. Such as, the introduction of a patent box tax regime and reduced ordinary tax rates.

The reduction of ordinary tax rates regime has caused tax rates in most Cantons to range between 11.9% and 21.6%.The Canton of Zug will remain as one of the lowest tax Cantons in Switzerland under the new TRAF tax regime.

What Are The Main Features Of TRAF Regime?

There are many different features that have been applied since the TRAF tax reform came into effect on 1st January 2020. Some of the main features adopted by the Canton of Zug include:

  • The combined corporate income tax rate will drop from 14.35% to 11.91% across all levels. This includes federal taxes, cantonal taxes and municipal taxes of Zug.
  • The tax rate for ordinary capital will remain at 0.0717% which is the current municipality of Zug. Taxable equity, group receivables and qualifying patents will only be included at 2% when calculating the taxes.
  • With the TRAF regime’s introduction of the patent box, the net profit from patents and similar rights will be included in the calculation of the taxable net profit, including a maximum reduction of 90%.
  • Following the TRAF regime, The Canton of Zug will now permit a tax deduction of 50% for research and development costs.
  • Tax privileges for holding companies, domiciliary companies and mixed companies have now been abolished under the new TRAF regime. This tax reform applies to holdings of at least 10% or where the value of the participation is at least CHF 1,000,000.00.
  • Some tax regimes by the Canton Of Zug have stayed the same under the new TRAF regime. This includes the partial taxation of a natural persons’ dividends from qualifying equity interests which remains at 50%. However, for federal tax there will be an increase from 60% to 70%.

Since the implementation of the TRAF regime, The Canton of Zug has also introduced a number of transitional measures which relate to disclosure and amortisation of hidden reserves and goodwill.

Do You Need Help Managing Your Swiss Corporate Tax Services?

At CO-Handelszentrum, we are not tax advisers but we are able to provide you with our knowledge of Swiss and international tax issues, creating an effective tax strategy to aid your short and long term plans. For more information, feel free to contact us today on +41 (0)41 766 31 50 or email us at info@co-handelszentrum.ch.