TRAF implementation: ordinances enter into force on 1 January 2020
Bern, 13.11.2019 – During its meeting on 13 November 2019, the Federal Council approved three ordinances to the Federal Act on Tax Reform and AHV Financing (TRAF). These amendments concerning the tax component will enter into force on 1 January 2020.
The Ordinance on the Reduced Taxation of Profits from Patents and Similar Rights (Patent Box Ordinance), the Ordinance on the Tax Deduction for Legal Entities’ Self-Financing and the amendment to the Ordinance on Flat-Rate Tax Credits (new: Ordinance on the Recognition of Foreign Withholding Taxes) concern the tax component.
The Ordinance on the Recognition of Foreign Withholding Taxes governs how non-recoverable foreign withholding taxes on dividends, interest and royalties are taken into account for taxes owed in Switzerland. With the deduction for self-financing, imputed interest on a portion of equity capital may now be deducted from taxable profit. The Ordinance on the Reduced Taxation of Profits from Patents and Similar Rights mainly governs the application of the OECD standard for patent boxes. In addition, it contains further details on the calculation of profits from patents and similar rights.
The three ordinances were generally accepted during the consultation process. Accordingly, the Federal Council made only minor changes to the ordinances relative to the consultation draft.