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Swiss Tax Reform To Shake Up Cantonal Tax Competition

Friday, September 21, 2018

Plans to overhaul Switzerland's corporate tax rules will affect the competitiveness of its cantons in different ways, according to a new report by UBS.

UBS has published its Cantonal Competitiveness Indicator report for 2018. It said that the relative location costs for companies in Switzerland are much the same as they were in 2016. However, the impact of the Federal Council's tax proposal 17 (TP17) package on cantonal tax rates on profits should result in changes to the cost of locating in the different cantons.

TP17 proposes the abolition of special arrangements for cantonal status companies and the introduction of a mandatory patent box regime for all cantons. It also proposes a relief restriction and reforms to the taxation of dividends.

According to UBS, analysis of current data shows that Geneva and Vaud would benefit from the changes, becoming considerably more attractive from a tax perspective. The relative competitiveness of Zurich and Aargau would however fall.

The real losers, UBS said, would be "those Central Switzerland cantons that have lured companies to settle in them with aggressive low-tax policies."