Switzerland enacted Swiss tax reform measures in August 2019, in particular, in view, of an internationally compliant and competitive tax framework. As a reaction to that and on 10 October 2019, the Council of the European Union (EU) confirmed that Switzerland meets all the good governance criteria related to tax transparency, fair tax competition and the implementation of minimum anti-Base Erosion and Profit Shifting (“BEPS”) measures. Switzerland will thus officially be removed from the EU grey list of non-compliant jurisdictions and will hence solidify its position as an attractive and sustainable business location.
The EU’s “black” and “grey” lists
Within the context of the OECD, G20 and EU’s ongoing efforts to countering harmful tax practices, the Council of the European Union published a list of countries considered as “non-cooperative jurisdictions for tax purposes” (often referred to as “EU blacklist”). The countries indicated on this list are considered to fail the “good governance criteria” related to tax transparency, fair tax competition and the implementation of minimum anti-Base Erosion and Profit Shifting (“BEPS”) measures, and are at risk of becoming a target for permissible punitive sanctions or defensive measures applied unilaterally by EU member states.
Since 2015 and even before, Switzerland has been actively engaged in reforming its corporate tax legislation in order to meet the new international standards published by the OECD. However, Swiss legislative procedures carried on for longer than anticipated and Switzerland was classified on the list of countries which had committed to making the required changes, but which had not implemented the required legislation.
Switzerland removed from grey list
On 19 May 2019, the Swiss people voted on the Federal Act on Tax Reform and AHV Financing (“TRAF”) in a public referendum and adopted the proposal with a majority of 66.4%. On 1 January 2020, the modifications introduced by the TRAF will come into force and will officialize Switzerland’s status as a fully compliant OECD member state.
During the meeting of the Council of the EU that took place in Luxembourg on 10 October 2019, the Council recognized Switzerland’s compliance in implementing its tax reform and confirmed Switzerland’s removal from the EU grey list with immediate effect.
Outlook
Now that its legislative procedures have been finalized, Switzerland will be able to focus on other international tax developments. It will participate actively and express views in discussions regarding the OECD’s initiative to introduce a global minimum tax and tax on digitalized business models. Furthermore, Switzerland will focus on maintaining and increasing international tax competitiveness through the detailed implementation of the voted TRAF as well as in relation with future tax reforms.
