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Corporate Tax Reform II approved — Orbitax Tax News & Alerts

On 24 February 2008, the corporate tax reform II (CTR II) was approved in a people's referendum. The voting was very close – just 50.5% of the votes were given in favour of the reform.

The general intention of the CTR II is the enhancement of the basic conditions of small and medium-sized companies and their owners in Switzerland.
The main issues of the CTR II are

-   reduction of economic double taxation on dividends paid out to an individual shareholder (i.e.) 60% of the dividends on qualifying participations (10% shareholding) held as a private asset are taxed at ordinary rates. In case the qualifying participation is held as a business asset by the individual, the percentage of dividends or capital gains taxed is 50%;
-   optional capital tax on cantonal level. So far, the cantons are required to levy a capital tax from legal entities. The CTR II allows the cantons to forfeit the capital tax in case a profits tax is due by the legal entity for the respective business year;
-   the threshold for the capital duty (Emissionsabgabe) due by cooperatives is raised to a paid-in capital of CHF 1 million (current threshold is CHF 50,000);
-   capital duties are not levied in case of a recapitalization of a corporation or cooperative in particular circumstances;
-   tax exemption for the distribution of paid-in surplus capital (agio) to shareholders. The tax exemption is limited to agio paid-in after 31 December 1996;
-   relaxed participation exemption. The threshold for participations qualifying for the participation exemption is reduced to 10% or a market value of CHF 1 million (current thresholds are 20% or a market value of CHF 2 million);
-   relaxed conditions for tax-exempt replacement purchases;
-   lower income taxes on liquidation proceeds received by a self-employed individual in case of cessation of his business;
-   advantageous valuation of securities held as a business asset;
-   tax deferrals in case of a transfer of a real estate property held as a business asset to the private assets of an individual; and
-   tax deferrals on hidden reserves on business assets in case of a division of an estate.