Zug new tax regulation 2017

Heinz Tännler, the Head of the Department of Finance supports the proposals of the Federal Steering Committee for the new Zug tax regulation 2017. Tännler feels encouraged in regard to the reform of the corporate tax law in Zug.

The Federal Steering Committee announced proposals for a new tax regulation in 2017, especially the Swiss corporate tax reform. The Head of the Department of Finance cooperated in its elaboration, thus supporting and emphasizing his intention to reform the corporate tax law in Zug, which includes the implementation of a standard corporate tax rate of approximately 12% without triggering significant financial losses for the Zug canton, for municipalities, companies and individuals. The reform is not meant to shift the tax burden to individual tax payers. The cantonal government is expected to begin consultations for implementation on cantonal level in April2017, depending on the progress made on federal level. The amendments could come into effect by 2020.

Federal level cornerstones and time table

The cornerstones and time table for the new tax regulation 2017were presented by the Federal Steering Committee. The tax regulation 2017 is meant to revoke certain tax privileges granted to companies operating in international jurisdictions and to increase the credibility of the Swiss tax system on international level.

The Steering Committee, consisting of federal and cantonal representatives, in close cooperation with municipalities and cities created a new package, considered viable and balanced for the Corporate Tax Reform III (CTR III) on 12 February 2017, which is important not only for Switzerland, but for Zug as an internationally-oriented business location. The package should clarify taxation and economic framework conditions for companies operating in international jurisdictions, being backed by a proposal of a political majority and having a reasonable timeframe to improve legal certainty and planning security. The proposals of the Steering Committee are based on the basic structure of the CTR III and approved by the Zug electorate. In addition, concerns and issues voiced before the referendum were taken into consideration, as well as an increase of the minimum amounts for child and education allowances as elements relevant for the society.

Being a member of the Steering Committee, the Head of the Department of Finance, Heinz Tännler, pushed Zug’s central interests even in the early stages of the legislative process. Thus, the presented cornerstones and time table are established in the right direction.  The Finance Director Heinz Tännler explains that «All those involved are asked to make an effort in the interest of a balanced and prompt solution and not to insist on any maximum demands. After the legal framework conditions are determined on federal level and the cantonal government pronounces its positions, the implementation on cantonal level should be treated with high priority». Furthermore, Heinz Tännler confirms that «We are still planning to implement the tax reform in Zug without causing significant financial losses for the canton and the municipalities and without shifting the tax burden to the individual tax payers. »

Planned cornerstones for the Canton of Zug

The main component of the tax reform implementation on cantonal level is the standard corporate income tax rate of approximately 12% for all types of companies. Other important measure is the introduction of a patents box with a tax relief on cantonal level of 90%.  Research and development activities are also promoted through a tax deduction on cantonal level of 150%. The maximum discharge, however, should equal 70% of the net profit. In additions amendments will be made to the capital taxes.  If a viable political compromise is achieved, the taxation of dividends that qualify should be increased from 50% to 70%. The canton of Zug is not affected by the minimum amounts conditioned for child and education allowances, because it already provides high amounts. Finance Director Tännler adds that «The overall well-balanced package will ensure that the Canton of Zug remains a competitive and attractive business location. »

SMEs benefit, no extra tax burden for the population

These adjustments will inevitably lead to a major reform of corporate taxation. Some companies that benefit from privileged taxation, such as holding companies, domicile companies and mixed companies will have to accept a moderately higher tax burden. On the other hand, the corporate income tax rate for all companies registered in Zug will be reduced from 14.6% to approximately 12%.  The corporate tax law reform should be neutral in Zug. Various additional revenue shortfalls and revenues, including indirect impacts of the national financial equalization scheme (NFA) offset each other almost entirely. «Zug’s cantonal government is placing a strong emphasize on the fact that the tax regulation doesn’t lead to a shift of the corporate tax burden to individuals», ensures the Finance Director.

Cantonal consultation on the draft expected in April 2018

The Department of Finance will launch consultations for the implementation on cantonal level as soon as possible, depending on the progress made on federal level. The current planning status anticipates consultations for April 2018. Consultations in the Federal Assembly regarding the tax regulation 2017 are expected to take place in the summer of 2018. The cantonal government of Zug plans to consult on the tax reform draft during the first semester of 2019, considering an effective inception starting with 2020.


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