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The tax reform should improve the Swiss debt market
April 9, 2020 | Economic News
The tax reform should improve the Swiss debt market
The Federal Council has offered changes related to income tax. The initiative provides for exemption from tax on interest-bearing investments. Resident legal entities suppose to apply these changes. Foreign investors will also receive benefits. The suggestions of the Federal Council aimed at encouraging corporations to issue bonds in Switzerland. This reform is expected to enhance Switzerland's role as a Switzerland international hub for financial services and investments.
Complementary reform measures also include the abolition of tax on the transfer of government bonds. Additionally, regulatory adaptations such as the Small banks regime contribute to creating a more competitive and flexible financial environment.
The Federal Council has suggested using the principle of a paying agent. Now the income received by the owners of foreign interest investments will be taxed.
Complementary reform measures also include the abolition of tax on the transfer of government bonds. Additionally, regulatory adaptations such as the Small banks regime contribute to creating a more competitive and flexible financial environment.
The Federal Council has suggested using the principle of a paying agent. Now the income received by the owners of foreign interest investments will be taxed.
What will the initiatives of the Federal Council lead to?
Changes around income taxation will simultaneously reduce revenues to the federal budget by 750 million Swiss francs. This will not have any significant impact since the budget has reserves.
Given the current level of interest rates, it is expected that revenues will decrease by 165 million Swiss francs. The closure of the tax loophole will attract 35 million Swiss francs to the budget. By canceling the transfer stamp duty on domestic bonds, the Confederation will cut budget revenues by about 50 million from domestic bonds.
Making assumptions about how the level of income will change, you need to consider that:
• the base is on a limited data set;
• for the future, it is not clear what the level of interest rates will be.
Recent initiatives such as the FINMA second registration reinforce Switzerland’s commitment to a modern and secure financial market framework.
There will likely be a significant increase in the number of transactions related to intragroup financing. This will strengthen the Swiss debt market.
It is also important to mention that Switzerland decided to maintain the status quo regarding blockchain taxation as detailed in the No blockchain tax developments.
Considering the proposed changes in dynamics, we can expect that the Confederation, cantons, and communes will receive additional budget revenues. Such reform will give the financial sector long-term sustainable prospects to create new jobs and increase value. In the dynamics, the ratio of costs and benefits acquired by the reform seems extremely successful. Meanwhile, the authorities remain vigilant, as shown by recent Swiss bank violation cases, to ensure the integrity of the financial sector during reform transitions.
The largest reduction in current revenue is initially expected by the Confederation budget. After five years, the proposed changes shall pay off.
Given the current level of interest rates, it is expected that revenues will decrease by 165 million Swiss francs. The closure of the tax loophole will attract 35 million Swiss francs to the budget. By canceling the transfer stamp duty on domestic bonds, the Confederation will cut budget revenues by about 50 million from domestic bonds.
Making assumptions about how the level of income will change, you need to consider that:
• the base is on a limited data set;
• for the future, it is not clear what the level of interest rates will be.
Recent initiatives such as the FINMA second registration reinforce Switzerland’s commitment to a modern and secure financial market framework.
There will likely be a significant increase in the number of transactions related to intragroup financing. This will strengthen the Swiss debt market.
It is also important to mention that Switzerland decided to maintain the status quo regarding blockchain taxation as detailed in the No blockchain tax developments.
Considering the proposed changes in dynamics, we can expect that the Confederation, cantons, and communes will receive additional budget revenues. Such reform will give the financial sector long-term sustainable prospects to create new jobs and increase value. In the dynamics, the ratio of costs and benefits acquired by the reform seems extremely successful. Meanwhile, the authorities remain vigilant, as shown by recent Swiss bank violation cases, to ensure the integrity of the financial sector during reform transitions.
The largest reduction in current revenue is initially expected by the Confederation budget. After five years, the proposed changes shall pay off.
Source: https://www.admin.ch/gov/en/start/documentation/me...
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.