RSM Switzerland


Corporate tax reform III (CTR III) Geneva

The Geneva strategy for the RIE III becomes finally a reality! (For more informationregarding the subject, please see our other newsletters on this topic).

In answer to the corporate tax reform, the Government of the Canton of Geneva takes the decision to set a single rate of 13.49%. This rate was chosen because of the strategic advantages it offers. First, an effective rate of 13.49% is undisputable from an international perspective. Second, it places Geneva in a harmonious regional perspective’s development. The third advantage is that, taking into consideration the additional burden in Geneva like the TPC (professional Business Tax), this rate is equivalent to the rate of the Canton of Vaud of 13.79%.

Regarding the tax measures, the Government of the Canton of Geneva decided to proceed with personalized and adapted arbitrations to the Canton. Regarding the “Patent Box” system, the income of the “Box” will continue to benefit from a preferential tax regime but with a reduction’s limitation of the taxation at 10%. Regarding the question of the R&D, the Government opted for an application of a “super-deduction” of 150%. The capital tax will be reduced for the equity related to the participation rights, to the rights of the “Patent Box” and to the loans between the group companies. A total credit will also be possible for the capital tax on the income tax (only the higher of the two is due).

However, the Government decided to renounce to the national interest deduction on the equity. Geneva will also not implement significant adjustments regarding the unrealized reserves that existed before the abolition of the privileged status of the companies.

The federal law concerning the RIE III introduces a limit to the effect of the various measures. The reductions can reach a maximal of 80% of the cantonal income tax. The Government of the Canton of Geneva decided to be more restrictive and caped this reduction to fix a minimum effective income tax rate of 13%.

The tax loss will be partially compensated by the increase of the part of the federal income tax refunded to the Cantons. The Canton of Geneva will receive an additional CHF 112 millions per year. Another Government’s measure will try to increase moderately the part of the dividends subject to the partial taxation of the dividends for individuals. Currently, as a reminder, the article 7 of the LHID enables the Cantons to limit the double economic taxation for the income that comes from qualified participations which means at least 10% of the share capital or the social capital of a limited company or of a cooperative. At the moment the dividend income from qualified participations is partially taxed (40% exemption). This rate will be increased and will allow additional income in the amount of CHF 18 millions for the Canton. However, the rate has not yet been decided.

Besides the taxable compensations, the Government decided to establish others accompanying measures that will enable each year to support the cantonal economy and the population. This shall allow to decrease indirectly the negative damages of the RIE III and boost the job market.

Regarding the taxation rate’s choice of 13.49% and including the compensation of the federal income and the amendment of the dividend’s taxation, the Government expects an income tax loss of around CHF 440 millions, which will represent a loss of CHF 352 millions for the Canton and CHF 88 millions for the communes.

However, the loss is expected to be provisory by the Government. According to the Government, the reform should boost the economy and the job market over the medium term and leverage additional tax income. The projections would also not look to the benefit effects of the income tax on the other kinds of taxes. In fact, even if the economic impacts are difficult to quantify, the decrease of the company’s taxation, that had no privileged tax status before the reform, will generate additional income that will return to the economic circle and finally generate new taxes.

Regarding the budgetary aspects, the Government wishes to maintain the public services despite the tax loss. He also suggests to suspend for a period of 5 years the mechanism of the fiscal deficit’s control provided in the LGAF without modifying the debt brake. This will also enable to have deficit budget allowing to absorb the transitional negative impacts of the RIE III. The communes should also benefit from a temporary derogation and from a flexibility regarding their budget.

The project of law will be introduced to the Geneva Parliament in November. Finally, the reform should come into effect at the beginning of 2019.

We will inform you of the next developments concerning this reform, in particular regarding the Swiss people vote on the Federal reform on February 12, 2017. If you need any information about this subject, please contact Mr. Daniel Spitz, certified tax expert, to the following number 021 311 00 21 or at this e-mail address [email protected].



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