Overview of the impacts on individuals
The impact on Swiss resident individuals can be divided into four aspects, as outlined below:
Action points until the end of the year 2019
The new rules will enter into force on 1 January 2020. Also taking into account tax developments in other jurisdictions, priority action points for individuals include the following:
- Increased taxation of dividends: In view of the higher taxation of dividends from 1 January 2020, companies should (if possible) make distributions to their shareholders still in 2019. Particularly, individuals fully owning companies should take a close look at the company’s freely distributable reserves and other financial aspects giving room for optimization.
- Transposition adjustments: Under current rules, taxpayers may benefit from tax effective restructurings. However, the abolishment of the 5% transposition threshold limits the opportunities for the transfer of shares for certain individuals. Therefore, it is necessary to assess possible restructurings this year on a case-by-case basis. Taxpayers are recommended to review their position and analyze what is the most beneficial approach.
- Relocation of activities/functions: Many companies have started to relocate functions to Switzerland in view of the future low tax rates without reliance on tax regimes. The possible additional benefit of a step-up in basis upon migration could result in higher (tax deductible) amortization expenses that may further enhance the tax efficiency. In any event, international tax developments seem to indicate a shift towards a tax rate-related approach.
- Repayment of capital contribution reserves: The restriction of the tax-exempt distribution of qualifying capital reserves for Swiss listed companies leads to an income and withholding tax burden for individuals. Depending on the place of residence of the taxpayer, this restriction of the tax-exempt distribution may lead to a non-refundable withholding tax burden. Thus, taxpayers are advised to review their Swiss tax position and analyze their overall set-up with regard to their strategy.Please contact your trusted advisor at Loyens & Loeff in case you have any queries. We provide tailor-made, multi-jurisdictional solutions to ensure your business has a smooth and efficient transition from the current Swiss tax environment to a post-BEPS world, both in Switzerland and in the European market.