Corporate Tax in Tax and Legal blog
Improving your tax accounting operating model: A game of chutes and ladders
Hands up, who enjoyed the year-end tax provision process? All those Excel files, lots of last-minute new versions, mysterious hard-coded figures, chasing across time zones for missing explanations, all with Finance eagerly awaiting the tax submission – what fun! And now Pillar Two adds a new twist to this game.
The introduction of Pillar Two marks a significant shift in the global taxation landscape. From a practical perspective, for tax functions within impacted organisations it adds additional pressure on the tax provisioning process at year-end. For some, an already straining system risks breaking under the weight of the Pillar Two requirements.
Pillar Two could become a catalyst to finally reassess your operating model around tax accounting and kick-off a transformation. This may either be out of necessity to meet the imminent and dynamic compliance and reporting requirements of Pillar Two, from a wish to seize the opportunity and utilise synergies across tax data and processes, or the decision to finally fix a painful tax provision process.
To effectively navigate the gameboard to improve efficiency, accuracy, and transparency, we highlight some ladders to success that will accelerate your journey to an efficient tax accounting operating model. But watch out for the chutes representing pitfalls that hinder success and cause setbacks along the way.
Lucerne plans to introduce Qualified Refundable Tax Credits (QRTC)
Lucerne is the fourth canton after Basel-City, Grisons, and Zug to publish its plans to remain attractive as a business location despite the global minimum tax (media release, in German). The focus is on the introduction of Qualified Refundable Tax Credits (“QRTC”). The consultation process will last until 9 June 2025 and the act will come into force on 1 October 2026 at the earliest.
Share Grants under Incentive Plan not Subject to Securities Transfer Duty
In a decision published before Christmas (9C_168/2023 and 9C_176/2023, in French), the Federal Supreme Court addressed whether the grant of shares to managers without consideration under a management incentive plan established by a Swiss holding company is subject to Swiss Securities Transfer Duty. The court concluded that, subject to certain conditions, no Securities Transfer Duty is to be levied.
Pillar Two Registration in Switzerland as of 1 January 2025
With the operational launch of the web-based application OMTax on 1 January 2025, companies in Switzerland will be able to fulfil their legal obligation to register for Pillar Two purpose. Registration will be exclusively electronic and must be completed at the latest before filing the tax return (typically by 30 June 2026). If a multinational group has several entities in Switzerland, a responsible entity must be designated for registration. However, this cannot be freely chosen but must be determined based on legal requirements.
Switzerland published draft law to extent tax loss period
The Federal Council (“Bundesrat”) published its draft law and the accompanying dispatch on the extension of the tax loss carry-forward period from seven to ten years (media release: German/French), but at the same time recommended that the proposal be rejected. What are the chances of this proposal being adopted by the Swiss Parliament?
Securities Transfer Duty Relief for Group Companies Acting as Intermediaries
The Swiss Federal Tax Administration (“SFTA”) issued a practice note (German/French) clarifying the topic of group holding or management companies acting as intermediaries mainly in an M&A transaction in view of the securities transfer duty. The new practice applies with immediate effect to all pending cases and will lead to a relaxation in this controversial topic.
Switzerland to introduce IIR in 2025, but not UTPR
The Federal Council decided on 4 September 2024 that Switzerland will introduce the Income Inclusion Rule ("IIR") on 1 January 2025. The introduction of the Undertaxed Profit Rule ("UTPR") has been postponed until further notice.
Federal Supreme Court Denies Tax Deductibility of Provisions for Unused Holidays
In a recent court decision (9C_192/2024, in French), the Federal Supreme Court dealt with the question of the tax deductibility of provisions for unused holidays. It remains to be seen whether this rather short and controversial decision will lead to a change in the practice of certain cantons.
Basel Plans to Strengthen its Attractiveness as a Life Sciences Business Location
After the cantons of Grisons and Zug (see recent blog), the canton of Basel-City has now also presented its plans to strengthen its economic attractiveness. The package includes measures in the areas of innovation, society, and the environment as well as tax compensation measures. The focus is clearly on promoting the key life sciences industry. The trend in all cantons so far is towards location promotion outside the tax system and it is unclear whether the Qualified Refundable Tax Credits (“QRTC”) instrument will become established in Switzerland.