ZURICH PROPOSES REDUCED CANTONAL CORPORATE TAX RATE

Zurich cantonal government is seeking to make Zurich more attractive from a tax perspective

Following the latest discussions on federal level regarding the Corporate Tax Reform III, the Zurich cantonal government decided to reduce its ordinary tax rate from the current 21.1% to 18.2% (effective tax rate for federal, cantonal and communal tax purposes) which is ultimately beneficial to all Zurich companies. Although this tax rate is still above the rates of some of its neighboring cantons, it will nonetheless strengthen Zurich’s position in the cantonal tax competition as the canton has decided on further tax relief measures.



Further tax relief measures to reinforce the attractiveness of the Canton of Zurich

All companies will benefit from a notional interest deduction. This would allow Zurich companies to deduct a calculated interest on their equity surplus for tax purposes.

In addition, the Zurich cantonal government suggests industry-specific tax measures. In essence, technology and research companies shall profit from a patent box regime (tax relief of 90% on patent income) and from an R&D super deduction amounting to 150% and group and finance companies shall profit from lower capital taxes.

Tax-privileged companies shall further benefit from transitional measures, which aim to mitigate unpleasant tax consequences. In particular, a step-up or a special tax rate solution shall be granted to such companies (read article for more information).

The cantonal parliament and probably the Zurich voters have the final say

The enactment of the suggested tax measures is now subject to a formal legislative process. First, interested groups will be invited to express their views in relation to the suggested tax measures in a consultation procedure. Once the consultation procedure is completed, the cantonal government will submit a dispatch to the legislative body of Zurich, which then has the final say – unless a popular referendum is taken against these tax measures. The latter procedure would entail a popular vote leaving the final decision in the hands of the Zurich voters.