We are in the middle of the parliamentary discussion of Tax Proposal 17. The Economic Affairs and Taxation Committee of the Council of States has released the first insights into potential adjustments and new elements. Author: Dominik Bürgy

On March 21, 2018, the Swiss Federal Council published the revised bill together with the dispatch on Tax Proposal 17 for parliamentary discussion.[i] The Economic Affairs and Taxation Committee of the Council of States published details of its discussions on May 16, 2018.

The Committee supports an approach with 4 key elements.

Dividend taxation

Dividend income of individuals from qualifying participations is currently partially exempt from taxation. At federal level, the Committee follows the proposal of the Swiss Federal Council with taxation of 70%. At cantonal level, however, the Committee is requesting taxation of at least 50% versus 70% as proposed by the Swiss Federal Council. This gives the cantons more flexibility to fix their tax reform.

Notional interest deduction

At federal level, no notional interest deduction is planned. At cantonal level, high-tax cantons should have the option of introducing a notional interest deduction which was not planned by the Swiss Federal Council. The notional interest deduction is an efficient alternative  way to increase  competitiveness from a tax perspective, especially for cantons without much scope for a tax rate reduction. The notional interest deduction (together with the patent box, super deduction on R&D as well as possible depreciations as a result of the early transition from privileged to ordinary taxation) should be subject to restrictions on overall tax relief. The definition of high-tax cantons has yet to be made.

Adjustment capital contribution principle

The Committee also agreed to adapt the capital contribution principle. A repayment scheme based on proportionality shall be introduced in the future. According to this scheme, dividends would be paid out proportionally from capital contribution reserves resp. other freely disposable reserves. Intra-group dividends would, however, not be affected. As the aim is to prevent possible circumvention of this new scheme, the Committee has requested further documents from the Swiss Federal Tax Administration before the next meeting.

Social compensation of the financial impact of the tax reform

For (socio) political reasons, the Swiss Federal Council proposed increasing the monthly minimum amount of child and education allowances. The Committee, on the other hand, wants to compensate this amount through the old-age and survivors’ insurance (OASI) based on the following fundamental idea: Every franc of tax revenue that is lost through Tax Proposal 17 at federal, cantonal and communal levels (static view) has to be offset against the financing of the OASI by one franc.


The Committee will continue the detailed discussion on May 24, 2018.  Tax Proposal 17 will be discussed by the Council of States on June 7, 2018.

We will keep you posted.


[i] See Global Tax Alert dated  March 26, 2018: http://www.ey.com/gl/en/services/tax/international-tax/alert–swiss-federal-council-publishes-revised-bill-together-with-dispatch-on-tax-proposal-17.