A nine-year trend of slashing corporate taxes in Switzerland has come to an end with companies facing virtually the same levies this year as in 2014, according to consultancy group KPMG.
The survey concludes that “Switzerland is standing at a crossroads in terms of its attractiveness as a business location” as the country awaits a new corporate tax system. A raft of changes to the tax code is expected in the coming months to ward off pressure from the European Union and the Organisation for Economic Co-operation and Development (OECD).
The new system will go some way to determining whether Switzerland retains its appeal as a favoured location for multinational headquarters.
Cantons have called a hiatus in reducing taxes for companies as they await the changes, which are likely to include tax breaks for patent royalties. The reforms would replace the contentious system of granting lower taxes on the profits that foreign companies earn abroad and other tax “optimisation” techniques.
KPMG’s “Clarity on Swiss Taxes” report found that the top corporate tax rate was just 0.01% lower than a year ago. Once again, canton Lucerne offered the lowest effective maximum tax rate of 12.32%.
The average rate among the 26 cantons was 17.9%, compared with 21.2% in 2006. Switzerland is still placed favourably in international comparisons, but tax rates vary significantly between cantons. Cantons located in the centre and east of the country generally offer lower levies than those in the French-speaking region.
Some countries in eastern Europe and the Middle East still offer lower rates than Switzerland, along with Ireland, Singapore and Hong Kong.
But the issue of tax competition between countries, aimed at attracting multinational brand names such as Google, Starbucks and Amazon, has come under critical attention in recent years.
The EU has investigated several countries, including Luxembourg, Belgium and Ireland, over aggressive tax systems that can reduce company taxes well below the headline rate. Switzerland has joined the global discussion, led by the OECD, on how to produce a more transparent corporate tax system together with a level playing field.
Income taxes also play a role in attracting multinationals as they affect international employees who move with relocated headquarters. For the second year in a row, income taxes increased slightly across Switzerland, according to KPMG.
The average maximum income tax rate rose 0.12% from last year to reach 33.86% (34.87% in 2006). This places Switzerland mid-table when compared with other countries on the KPMG survey.
Zug has the lowest top income tax rate of 22.86% while Geneva levied the highest maximum bracket of 44.75%.
Last year, voters rejected a referendum calling on all cantons to scrap preferential tax rates for wealthy foreigners living in Switzerland.