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Holding companies


Bern and Brussels bury hatchet on business taxation


By Urs Geiser



Senior officials from the Swiss finance ministry and the European Union have initialled a mutual understanding formally ending a long-running dispute over controversial business taxation.

Under the deal Switzerland has pledged to abolish certain preferential tax regimes for foreign companies considered harmful by Brussels. EU member states have promised to lift sanctions once the contentious tax practices are suspended under a planned reform of the corporate tax system.

The Swiss government is still to sign the understanding with the EU following approval by parliamentary committees.

Jacques de Watteville, state secretary in the finance ministry, stressed the importance for the understanding for investors and businesses.

“We have buried the hatchet after nine years of difficult negotiations with the EU and have created legal certainty,” de Watteville told journalists in Bern on Tuesday.

Heinz Zourek, director general of the European Commission’s taxation and customs unit, said the deal, still to be confirmed by the member states, was a big step to bringing “peace and understanding” between the 28-member bloc and Switzerland.

 OECD

Zourek said Brussels was aware of the time needed for the Swiss parliament to adapt legislation. However, the EU reserves the right to take new countermeasures if Switzerland fails to do away with tax rules incompatible with norms set by the union.

He added that experts would examine plans by Switzerland to introduce so called IP boxes, a preferential tax regime to promote science and innovation.

De Watteville said the new Swiss corporate tax laws would be based on international standards.

Switzerland will also remain active within the Organisation for Economic Co-operation and Development (OECD), currently developing international standards for business taxation, he added.

Black list

Switzerland has been under pressure to overhaul its federal and cantonal tax laws which currently provide for different treatment of domestic and foreign revenue, also known as “ring-fencing”.

In 2007, the EU threatened to break off a crucial free trade accord if Switzerland refused to adopt an EU code on corporate taxation.

Italy has blacklisted Switzerland as a tax haven complicating business activities for Swiss companies in the neighbouring country.

Italy is a key export market and supplier of goods and services for Switzerland. Major Swiss banks and insurances, as well as engineering and pharmaceutical and food companies, generate tens of thousands of jobs in Italy.

By Urs Geiser, swissinfo.ch



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