The abolition of Swiss withholding tax on bonds and other collective debt financings is a welcome measure that allows Switzerland to significantly strengthen its position as an international finance and treasury centre. All types of financing and refinancing activity in Switzerland will be facilitated as adverse withholding tax consequences can be prevented. This fundamental change of the Swiss withholding tax regime is expected to come into force on 1 January 2022 at the earliest.
Under the current tax framework, the non-uniform cantonal tax practices on the capital gains treatment and valuation of employee shares in start-ups and other non-listed companies lead to different tax consequences for employees depending on their place of residence. The Swiss Federal Tax Administration recently created a favourable framework for start-ups and enhanced the legal certainty and predictability of the tax consequences with regard to non-listed employee shares.
The ordinance concerning the tax credit provided for in applicable Swiss double tax treaties has been significantly amended with effect from 1 January 2020. The new ordinance provides welcome amendments, including an extension of the scope of application to Swiss permanent establishments of foreign companies. In contrast, some of the new features introduced in the ordinance may have a negative effect on taxpayers.
The EU Directive on Administrative Cooperation need not be incorporated into Swiss law, but its impact on groups based in Switzerland may be significant. Considering the directive's broad scope, it is crucial that Swiss-based groups identify qualifying intercompany transactions at an early stage and ensure that they comply with the applicable subsidiary reporting obligations in cases with no involvement of EU intermediaries.
In economic life, debt waivers involving associated companies take on central significance in the context of a restructuring. It can be assumed that restructuring will greatly increase in the near future due to the financial difficulties of many companies resulting from the current COVID-19 crisis. Although the tax treatment of a debt waiver granted by an independent third party is essentially well defined (ie, it is recognised in income), many questions will arise if debt is waived by a related party – namely, a shareholder.