On 13 October 2020, the appeal period for the cantonal implementation of the tax reform in Nidwalden expired unused. The tax reform in Nidwalden will enter into force on 1 January 2021.
Following the approval of the Federal Act on Tax Reform and AHV Financing (TRAF) in May 2019, which entered into force as of 1 January 2020, the cantons were required to implement the new measures into their cantonal tax laws and ensure conformity with the federal TRAF regulations.
The tax privileges for holding companies, domicile companies and mixed companies are internationally no longer accepted and are abolished in Switzerland as of 1 January 2020. At the same time, transitional rules are supposed to ensure a smooth transfer to ordinary taxation. Additional measures that are introduced with TRAF are the patent box and the R&D super deduction.
Tax reform in Nidwalden
Due to the COVID-19 pandemic, the planned cantonal vote on 17 May 2020 was cancelled. On 27 September 2020, the voters in the canton of Nidwalden approved the cantonal tax reform bill with a 59.4% majority.
With the publication in the cantonal gazette on 13 October 2020, the tax reform in Nidwalden is formally enacted. Therefore, for tax accounting purposes (IFRS and US GAAP), the amended cantonal tax law needs to be considered for October 2020 closing.
Tax measures in Nidwalden
To remain attractive as business location, Nidwalden introduces various available TRAF measures. The main tax law changes in the canton of Nidwalden can be summarized as follows:
- A core component of the amended tax law is the reduction of the corporate income tax rate at cantonal level, which results in a reduction of the overall corporate income tax rate (including direct federal tax) on pre-tax income from 12.66% to 11.97%.
- Specific transitional rules will be available for companies that will lose their preferential cantonal tax regimes. In addition to the already available step-up practice, the so-called “two-rate system” will be newly introduced. Profits relating to the realization of hidden reserves that were generated under a privileged tax regime will, upon request, be subject to a reduced tax rate until the end of 2024 (phased increase of reduce tax rate from 1.0% to 1.8%).
- The introduction of the OECD-compliant patent box is made with full use of the maximum relief of 90%.
- The maximum cantonal tax relief is set to the maximum of 70%.
After the approval of the tax reform in Nidwalden, both the federal as well as the cantonal tax reform measures will enter into force on 1 January 2021.
The tax reform brought an unprecedented change to the Swiss corporate tax landscape and most corporate taxpayers are impacted by the most significant overhaul of the Swiss tax system in decades. As the tax reform entered into force on 1 January 2020, taxpayers are advised to analyze the impact of the changes and to evaluate appropriate measures in order to seize opportunities and prevent from competitive disadvantages.