Swiss Federal Council Approved Withholding Tax Changes

On 10 March, The Federal Council approved the changes to the Withholding Tax Ordinance in order to strengthen the financing activities of groups in Switzerland. The reforms will affect groups in which a Swiss group company provides a guarantee for a bond of a foreign group company.


Currently, groups established in Switzerland often carry out targeted financing activities abroad avoiding the withholding tax, which would be due in certain situations were they to conduct the financing via group companies established in Switzerland. The withholding tax in Switzerland is collected from the debtor of the taxable item, in accordance with the debtor principle. It is refunded only if the corresponding income is declared.


The reforms will affect groups in which a Swiss group company (guarantor) provides a guarantee for a bond of a foreign group company (issuer) belonging to the same group. The forwarding of funds from the foreign issuer to a group company established in Switzerland will be possible up to the maximum amount of the equity capital of the issuer without the interest on it being subject to withholding tax, The Federal Council informed.

Additional Tax Receipts

"Insofar as the ordinance amendment now decided strengthens the establishment of headquarter activities with further central corporate functions in general and treasury activities in particular, value creation will be enhanced. This will give rise to additional tax receipts in terms of these companies' profit tax (direct effect), suppliers' profit tax (indirect effect) and the income tax and VAT of additional employees and higher paid staff (induced effect). In contrast, any short-term reductions in withholding tax receipts should be negligible," The Federal Council informed.

The amendments will enter into force on 1 April 2017.

Sources: The Federal Council, Customs Today

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