Overview over cantonal tax law developments of selected cantons (Fribourg, Geneva, Jura, Neuchâtel, Vaud and Valais)

1. April 2011
Tax News
Table of contents
Editorial
3 Contribution of capital principle – first
practical experiences with 2010 annual
financial statements
Rainer Hausmann
3 Switzerland, Germany amend double tax
treaty
Daniel Käshammer, Christian Wasser,
Marlene Kobierski
4 Overview over cantonal tax law develop-
ments of selected cantons – Part 2
Diverse authors
6 Disagreement in parliament on the Dear Reader,
introduction of a single VAT rate
Barbara Henzen, Ladina Nick
7 “Too big to fail” The first quarter of 2011 is already behind us. In this issue we would like
Hans-Joachim Jäger, Rolf Geier to provide you with up-to-date information about a number of exciting
8 EU dialogue with Switzerland – solution developments during the period.
within reach?
Markus F. Huber We report on initial findings from the practical implementation of the new
9 FATCA regulations will change the capital contribution principle, and explain the current situation arising from
financial services landscape from 2013 the amended double taxation agreement that was signed by the finance
onwards
Hans-Joachim Jäger ministers of Switzerland and Germany on October 27, 2010. We also take a
look at legislative changes and developments in Western Switzerland, Zurich,
10 Switzerland: New Federal Law on the
taxation of equity based compensation and Aargau in the second part of our canton update.
schemes to be introduced in 2012
Markus Kaempf, Louise Barrelet The disagreement in parliament on single rate VAT and fiscal exceptions is also
11 Current developments regarding Swiss highlighted, as is the controversy surrounding changes to the laws governing
pension funds the handling of systemic risks by the big banks, under the keyword «Too big to
Charlotte Climonet, Sandra Beer
fail.» Furthermore, we focus on the dialog between the EU and Switzerland in
12 Withholding tax developments for relation to the adoption of the EU Code of Conduct.
employees resident in Switzerland and
abroad
Andreas Tschannen, Lukas Naef The Foreign Account Tax Compliance Act (FATCA) is practically a perennial
13 VAT classification criteria service
theme, and we explain the USA’s plans to close any gaps in the regulations that
contracts / property purchase contracts may still exist.
Susanne Gantenbein, Simone Wassmer
14 Potential new regulations relating to
intermediation services in the financial
sector
Barbara Henzen, Olivia Schwarz
t

2. Finally, we take a look at the future, explaining the scope for interpretation
offered by the new Federal law on the taxation of equity-based compensation
systems that will come into force in 2012, and how it may be implemented in
practice.
You will find these and many other practical topics summarized in this issue.
We wish you an interesting and informative read.
Sincerely,
Dominik Bürgy
Partner, Tax Leader Switzerland
dominik.buergy@ch.ey.com
Tax News Ernst & Young April 2011 2

3. Contribution of capital principle be applied when it comes to writing off
losses, but not when it comes to the cost
– first practical experiences with 2010 of capital contributions, which is why tax
adjustments are made. The only constant
annual financial statements here is that both are charged to share-
holders. As mentioned, the courts will
definitely be able to give rulings on these
Rainer Hausmann, Partner International Tax Services; Zurich, rainer.hausmann@ch.ey.com
matters.
3. Can the use of the premium for
In addition to ordinary annual 2. Can capital contributions that were direct depreciation in previous years be
financial statements, a topic previously offset against earlier losses made retrospective again?
much discussed over the past also be shown in reserves from capital The Code of Obligations allows the pre-
few weeks has been the practical contributions? mium to be used for depreciation, but
implementation of the contribution The circular on the contribution of capital such depreciation is very rare and dis-
principle explicitly states that capital couraged in legal literature. There appear
of capital principle. There has been to be problems if this type of depreciation
contributions that were cancelled through
a never-ending list of questions stated in a previous year is made retro-
the elimination of loss carry-forwards
to be answered. Very often, these under commercial law, may not be shown spective for the purposes of reporting a
revolved around how to post capital as reserves from capital contributions for higher capital contribution. This would
contribution reserves, responsibi- require an adjustment to financial state-
tax purposes. Moreover, losses that were
lities regarding reclassifications ments that had already been approved
charged to those reserves from capital and would be very difficult to carry out
or whether to present capital con- contributions may reduce these defini- in practice. Furthermore, the Federal Tax
tribution reserves in the balance tively. It is worth noting here that accor- Administration could take the view that
sheet or the notes. The focus has ding to the Federal Tax Administration, capital contribution reserves set against
no longer been so much on purely the principle of authoritativeness must losses are permanently lost.
technical tax considerations and
the most contentious issues have
been the same to a certain extent.
However, there were always new to-
pics to discuss. Three major issues
are treated again below. Switzerland, Germany amend double tax treaty
Daniel Käshammer, Senior Manager German Tax Desk New York; Daniel.Kaeshammer@ey.com
Christian Wasser, Senior Manager Tax Services Zurich, christian.wasser@ch.ey.com
1. Does the cost of a capital Marlene Kobierski, Assistant Tax Services Bern, marlene.kobierski@ch.ey.com
contribution reduce capital contribution
reserves?
The Federal Tax Administration has On 27 October 2010 the finance exchange of information. In line with this
apparently issued internal guidelines regulation, the competent authorities of
ministers of Switzerland and
according to which the costs of a capital
Germany signed a new protocol Switzerland and Germany will exchange
contribution reduce capital contribution
that will amend the double tax such information as is foreseeable
reserves. This applies irrespective of
treaty between the two states. It relevant for carrying out the provisions
whether these costs are posted through
of the treaty as well as the domestic tax
the income statement or charged includes changes of the dividend
laws of both states with respect to taxes
directly to equity capital. The Federal Tax article, the non-discrimination
of any kind. Therefore, the parties are not
Administration is therefore not applying clause, the mutual agreement
the principle of authoritativeness on this allowed to decline providing information
procedure and the exchange of solely because the information is held
point and is making a tax adjustment information. Furthermore, the
accordingly. This may have a serious by a bank, another financial institution,
ministers declared their intention a nominee or an agent of a financial
impact on shareholders, as considerable
costs are incurred, particularly when lar- to solve jointly the conflict institution. The protocol states that
ge capital increases are carried out. The regarding Swiss bank secrecy and “fishing expeditions” are not allowed.
Tax Administration’s approach is hard to tax evasion. Accordingly, there must be sufficient
understand if, depending on the situation, evidence to identify the person involved
the principle of authoritativeness is used in the investigation. Likewise, the parties
on one occasion but then not on another. Exchange of information are not obliged to exchange information
The courts will definitely have the last The new protocol adopts the standards on an automatic or spontaneous basis.
word on this subject too. See also the of Article 26 of the OECD model con- Finally, taxpayers are entitled to use
next point in this regard. vention (OECD-MC) with regard to the the usual domestic procedural rights to
Tax News Ernst & Young April 2011 3

4. oppose a disclosure, including the rights subject to a residual withholding tax of calendar year next following that in which
of first notification or of an administrative 15%. the Protocol enters into force, whereby
appeal, before the requested state is • The non-discrimination article now specific details apply for the individual
allowed to exchange the information. includes a new paragraph in line with provisions.
article 24 para. 4 of the OECD-MC.
Further changes included in the Based thereon, interest, royalties and Declaration of intent to end the tax
protocol other disbursements paid by a compa- dispute
The new protocol also includes, among ny to a resident in the other state are To end the tax dispute between Switzerland
others, the following changes: deductible for income tax purposes, and Germany, the two states signed a
• The threshold for qualified participa- similar to such payments within one non-binding letter of intent to introduce a
tions, eligible for the 0% withholding state. The same applies for any debts withholding tax on taxpayers who prefer
tax rate, decreases from the current with regard to capital taxation when not to “officially” declare their income out
rate of 20% (without any specific the oblige is a resident of the other of their passive assets. This letter of intent
holding period) to 10% combined with contracting state. follows the one Switzerland signed with the
a holding period of at least 12 months. • The mutual agreement procedure is United Kingdom on 25 October 2010. The
If a dividend is distributed within the extended by introducing an arbitration contemplated withholding tax on past and
first 12 months of holding, the 0% rate clause and detailed regulations as future capital income will provide for a tax
may be claimed retroactively, once regards procedural aspects. burden comparable to the regular taxation
the one-year holding requirement is in Germany.
The Protocol will enter into force after
fulfilled. the implementation procedures of both Furthermore, the parties concluded
• Furthermore, the protocol clarifies contracting states have been completed that they seek for an amicable solution
that dividends distributed by a quoted and the contracting states have notified regarding the issue of the purchase of data
German real estate corporation (REIT- each other accordingly. The provisions of relevant for tax purposes (i.e., data CD)
AG), a German investment fund or a the new protocol will generally apply on as well as the market access of financial
German investment corporation are or after the first day of January of the service providers.
Overview over cantonal tax law developments
of selected cantons – Part 2
Author index at the end
In this second part of our overview Canton of Aargau Federal Supreme Court ruling on partial
of the changes made to cantonal taxation of holdings
tax law for 2011, we will be Implementation of corporate tax The legislature of the canton of Aargau
considering the caontons of Aargau reform II has not yet corrected its provisions,
and Zurich as well as the French- The canton of Aargau already implemen- deemed illegal under a Federal Supreme
speaking Switzerland, i.e. the ted a number of changes envisioned in Court ruling of 25 September 2009, on
cantons of Fribourg, Geneva, Jura, corporate tax reform II before 2011, such the partial taxation of qualifying holdings.
Neuchâtel, Vaud and Valais. as the expanded replacement provision. The ruling stated that the restriction of
The remaining provisions which had to the partial taxation to holdings in Swiss-
be implemented came into effect on domiciled companies violates the Federal
One change occurring in all of the French- 1 January 2011. These included (i) Constitution. Furthermore, according to
speaking cantons is the entry into force extending the participation exemption the Supreme Court, the application of the
on January 1, 2011 of all mandatory
(Beteiligungsabzug), (ii) introducing partial taxation for (qualifying) holdings
Federal legislation (or its incorporation
the capital contribution principle, (iii) is also unconstitutional for wealth tax
into cantonal laws) regarding the
Corporate Tax Reform II, including new valuing securities as business assets more purposes. This may also apply to the
thresholds for participation exemption advantageously, (iv) deferring taxation more general regulations in Aargau where
(on dividends or capital gains) and on the transfer of property from business for wealth tax, a 50% reduction in the
new rules on tax-exempt replacement assets to private assets and (v) allowing tax value applies to shares in domestic
purchases. Only the other changes are tax relief for liquidation profits at the end corporations and cooperatives that are
listed below. of self-employment in specific cases. not traded on an organized basis.
Tax News Ernst & Young April 2011 4

5. Canton of Zurich which means that the sale of business considerable borrowed funds to finance
property is subject to property gains tax. transactions» criteria. It may be assumed
Implementation of corporate tax While gains from the sale of business that the Federal Supreme Court will retain
reform II property under the dualistic system are its rather broadly formulated rules.
Under statutory law, Zurich will not subject to regular corporate income
implement the federal corporate tax tax and it has always been possible to
offset them against any operating losses, Voluntary declaration of tax evasion
reform II provisions until the beginning
offsetting between different cantons and simplification of the additional
of 2012, subject to the adoption of the
with regard to properties located in taxation in case of inheritance
planned referendum on 15 May 2011.
monistic cantons became only mandatory In March 2010, the canton of Zurich
In the meantime however, the relevant
following several Federal Supreme Court published a leaflet on the voluntary
provisions of the Tax Harmonization Act
rulings issued between 2004 and 2006. declaration of tax evasion with immunity
apply directly. Accordingly, the cantonal
However, offsetting is still not permitted from prosecution and on the simplifica-
tax authorities have already amended
within the canton, at least for the time tion of the additional taxation in case of
various directives to reflect the new
being. Although the Zurich Administrative inheritance. It states that any taxpayer
(material) legal situation (see taxation of
Court recognized that the Zurich regula- who voluntarily report tax evasion or
companies with qualified holdings as well
tions are unconstitutional, it decided not tax fraud themselves for the first time
as holding, domiciliary and mixed compa-
to intervene directly in legislation due and fulfill other criteria set out in the
nies; valuation of securities and assets for
to the division of powers principle. The leaflet would not have to pay a penalty
wealth tax; coordination of (corporate)
ruling is the subject of an appeal to the tax. However, additional tax and default
income tax assessments and property
Federal Supreme Court and is therefore interest would still be payable. If heirs
tax assessments for business assets and
not yet legally binding. Those people report that a deceased person made
of legal entities). The proposal for the
affected should keep an eye on further incorrect declarations, the additional tax
referendum also provides for corporate
developments and adjust their approach due on the corrected positions would
income tax to be offset against capital tax
accordingly. only apply for the last three years prior
in future.
to death rather than the last ten years, as
was previously the case. Like corporate
Shareholders’ debt waivers tax reform II, Zurich plans to implement
Commercial securities trading
On 30 June 2010, the Zurich these requirements of the federation into
In two rulings in 2010, the Zurich
Administrative Court issued a ruling con- statutory cantonal law at the beginning
Administrative Court upheld its
cerning the tax treatment of debt waivers of 2012. In the meantime, the correspon-
regulations on the «commercial nature
by shareholders in the event of restructu- ding provisions of the Tax Harmonization
of activities» which differ from those of
ring. Under it, Zurich’s current cantonal Act apply directly in this matter as well.
the Federal Supreme Court. Accordingly,
practice must be applied for the purpose still all criteria of self-employment have
of direct federal taxes as well as cantonal to be met cumulatively to determine
and municipal taxes. This practice Revision to reduce the tax burden on
whether private asset management or individuals
states that an investor’s debt waiver in a whether commercial securities trading is
company undergoing restructuring should This revision of Zurich tax law, which in-
taking place (respectively whether the cludes the elimination of the two highest
as a general rule be treated as a tax-free capital gains generated are tax-exempt
capital contribution. The debt waiver may progressive tax brackets and an increase
or taxable). This specifically includes in numerous deductions, is also subject to
only be reclassified as a taxable gain if demonstrating clear participation in the
the shareholder committed to the waiver a referendum on 15 May 2011 along with
market place. The case is still pending two counter-proposals. If adopted, the
in his function as business partner similar before the Federal Supreme Court.
to third-party creditors. This differs from changes will probably come into effect in
the Federal Tax Administration’s current In 2009, the Federal Supreme Court 2012.
rules where, for direct federal tax, ge- confirmed in a similar case its own set of
nerally every debt waiver is classified as criteria on commercial securities trading
taxable income and may only be treated under which not all indications have to
as tax-neutral in exceptional cases. The be met cumulatively. Unlike the Zurich Canton of Fribourg
Federal Tax Administration has appealed Administrative Court, it maintained that
A new law on intercommunal financial
the ruling to the Federal Supreme Court. in carrying out securities transactions,
equalization, which entered into force on
The Tax Office of the Canton of Zurich has the taxpayer appears to clearly act on the
January 1, 2011, has been implemented
therefore decided to wait for the Supreme market irrespective of whether they carry
by the canton of Fribourg to reduce the
Court’s decision before dealing with any out the transactions themselves or autho-
financial disparities between municipali-
debt waivers that would be assessed dif- rize a third party to do so. Furthermore,
ties.
ferently under Zurich and Federal rules. it deemed the «systematic approach»
and «use of specialist knowledge» criteria In addition, a reduction of corporate tax
to be no longer appropriate, as these rates has been introduced (shown below
Allocation losses within the canton are met by nearly everyone today. It before multipliers, e.g. consolidated can-
The canton of Zurich applies the monistic set greater store instead by the «level tonal/communal multiplier for Fribourg is
system to the taxation of property gains, of transaction volume» and «use of 187.3%):
Tax News Ernst & Young April 2011 5

6. • Corporate income tax rate applicable However, the entry into force will only The capital tax rate was reduced by half
to all types of companies, associations be effective subject to two cumulative from 0.12% to 0.06% (before multipliers,
and foundations was cut to 8.5% conditions : e.g. the consolidated cantonal/ communal
(having been 9.5% in 2010). multiplier for Lausanne is 234.5%).
• referendum against this law change
• Capital tax applicable to corporations should be rejected by popular vote on
and cooperatives will from now on be April 3, 2011 and
calculated at the rate of 0.16% (0.18% Canton of Valais
• another cantonal law on children care
in 2010). Since January 1, 2011, gifts and
should be accepted by popular vote on
• Holding and domiciliary companies April 3, 2011. donations to non-profit organizations
pay tax on capital at a rate of 0.017% based in Switzerland and benefiting from
(0.019% in 2010), and the rate tax-exemption (due to corporate goals
On March 24, 2011, the Federal Court
remains unchanged at 0.008% for of public service or non-profit public
cancelled the vote, however originally
capital above 500 million francs. activity) are deductible up to 20% of the
set on April 3, 2011, following an appeal
net corporate income (10% in 2010).
filed by two citizens of the canton of
• Capital tax rate applicable to associ-
Neuchâtel. After alignment of the two
ations, foundations and other legal
bills in Parliament, it is anticipated, in Authors
entities was cut to 0.255% (0.285% in
the event of a favourable vote of the
2010). Aargau, Zurich
Neuchâtel Parliament, that the vote of
the people of Neuchâtel, this time only on Christian Wasser, Senior Manager Tax Services Zurich,
christian.wasser@ch.ey.com
Canton of Geneva the referendum against the tax rules, may
David Schneider, Assistant Tax Services Zurich,
be held in summer 2011. david.schneider@ch.ey.com
No other changes.
Fribourg, Geneva, Jura, Neuchâtel, Vaud and Valais
Eric Duvoisin, Manager Corporate Tax,
Canton of Jura Tax Services Geneva, eric.duvoisin@ch.ey.com
Canton of Vaud Viviane Disière, Assistant Corporate Tax,
No other changes.
A new law on intercommunal financial Tax Services Geneva, viviane.disiere@ch.ey.com
equalization with entry into force as of
January 1, 2011, was implemented by
Canton of Neuchâtel the canton of Vaud in order to reduce
Income tax should offset capital tax with financial disparities between municipali-
entry into force in January 1, 2011. ties.
Disagreement in parliament on the introduction of a single VAT rate
Barbara Henzen, Partner Indirect Tax Zurich, barbara.henzen@ch.ey.com
Ladina Nick, Assistant Indirect Tax Zurich, ladina.nick@ch.ey.com
On 14 March 2011, the Council of The Swiss VAT reform is scheduled to be have remained in effect as no changes to
States debated the second part of carried out in two stages. The first stage them were planned. The third alternative
the Swiss value-added tax (VAT) has already been implemented with a total evaluated corresponds to the dual rate
revision of the VAT Act that came into model already submitted for consultation,
reform, including the introduction
effect on 1 January 2010. On 24 June in which the standard rate of 8 % would
of a single VAT rate. In contrast to 2010, the Federal Council submitted the remain unchanged. Exceptions would
the National Council, the Council politically disputed second part of the be repealed to the same extent as in the
of States has decided not to refer reform to the parliament. The Federal first model. However, these areas would
the draft back to the Federal Council had first considered a number be subject to a reduced rate of 3.4%. In
Council. The single VAT rate was of possible reforms and examined three the end, the Federal Council has decided
also debated controversially in the alternative models. The first alternative to support the first alternative and to
involved replacing the three current rates propose the introduction of a single rate
Council of States however: The
with a single rate of 6.5% and abolishing of 6.5 %.
small chamber’s decision not to most fiscal exceptions. The second
refer the draft back was a close alternative also foresaw merging the three The National Council rejected the Federal
19 to 18 vote. current tax rates into a single rate of 7.1%. Council’s proposed single rate on 15
However, existing fiscal exceptions would December 2010 and referred the matter
Tax News Ernst & Young April 2011 6

7. back to the Federal Council. The National to expand the five exceptions provided Following the Council of States’ decision on
Council has instructed the government for in the draft. In the referral application, 14 March 2011, the National Council will
to work out a dual rate model with it demanded additional exceptions for reconsider its rejection of the draft. If the
exceptions. The National Council wants the healthcare and education, culture, National Council should confirm its earlier
food plus the hotel and restaurant industry sporting events as well as for charitable decision, the referral of the draft back to
to be subject to a reduced tax rate, but organizations. The Federal Council was the Federal Council becomes definitive.
did not specify what that rate should be. instructed to avoid tax increases in the New developments can therefore be
Furthermore, the National Council voted development of the new draft. expected. We will keep you informed.
“Too big to fail”
(which usually include a clause on the ex-
Hans-Joachim Jäger, Partner Financial Services Zurich, hans-joachim.jaeger@ch.ey.com change of information), the Swiss paying
Rolf Geier, Partner International Tax Services Zurich, rolf.geier@ch.ey.com agent is under no obligation to withhold.
Finally, where the interest recipient is a
natural person residing in a EU member
country, the EU savings tax needs to be
In November 2009, the Swiss tax on bonds and money market papers
withheld (also on Swiss bonds under the
Federal Council had commissioned entirely and (ii) to abolish the issuance
proposed regulations) unless the payee
an expert party to propose stamp tax on shares / stock in particular,
chooses to be reported on.
changes in the Swiss law. These that had been issued subsequent to
the conversion of a CoCo bond. (i) The proposed measures are supposed to
changes should prevent default facilitate investments of foreign lenders
This is supposed to render the Swiss
situation of banks, which are financial market more attractive for in Swiss bonds where otherwise the Swiss
considered relevant for the Swiss those domestic debtors wishing to issue withholding tax was considered a major
economy (so-called “too big to bonds in Switzerland and to alleviate the impediment, both from a cash-flow and
fail” institutions). Within the inter-company financing through treasury administrative burden perspective. At
proposed legal changes, there centers in Switzerland. In addition, the the same time, the paying agent system
proposal (ii) is supposed to enable Swiss should ensure that Swiss resident taxpay-
are also accompanying measures
banks to issue CoCo bonds under Swiss ers (notably natural persons) comply with
pertaining to the Swiss tax their tax filing obligations (otherwise,
law – notably in the field of the law and still provide a tax treatment
that also appears attractive for foreign the tax withheld would constitute a non-
Swiss issuance stamp tax and the creditable charge) and that residents of
investors.
Swiss withholding tax on interest non-treaty countries suffer the 35 percent
payments. b) Withholding taxes withholding as a final cost. In all other
In the area of withholding taxes, the cases, the tax authorities have ways and
proposed changes are more radical: means to either audit the payees’ tax
Banks are currently considering to issue compliance or request further information
for interest payments (not though for
contingent convertible bonds (“CoCo in their respective countries of residence.
dividend payments), the long established
bonds”) which can be converted into
Swiss system of withholding tax is sup- Whilst the proposed measures appear to
equity once a bank falls short of certain
posed to be transitioned from the debtor be helpful for the Swiss bond issuance
equity thresholds. From a political angle,
principle to a paying agent system – as market, paying agents are likely to face
and to prevent that Swiss banks need
is already known for the EU savings tax. additional burdens: they need to have
to issue their CoCo bonds in a foreign
Besides banks, every economic operator systems in place which must be able to
jurisdiction, it seems desirable that Swiss
paying interest on bonds would need to clearly identify different categories of
banks can issue their convertible bonds
withhold 35 percent of Swiss withholding payees with a higher granularity of infor-
in Switzerland and under the regulations
taxes if paid to certain recipients. mation (a task formerly not necessary).
of the Swiss domestic law. In particular,
Essentially, the paying agent would need In addition to this, payment streams
the issuance tax on the issuance of the
to withhold on interest payments resulting (including original issue discounts) origi-
bond itself, on the issuance of new shares
from Swiss and foreign bonds if paid to nating from both, foreign and Swiss-issued
subsequent to a possible conversion as
Swiss resident natural persons. Where the bonds need to be flagged and will trigger
well as the burden of the withholding tax
recipient — irrespective of its legal nature a withholding.
are perceived to be a strong impediment
to the decision of issuing these bonds — is resident in a non-treaty country, the The effective date for the accompanying
in Switzerland. Hence, the proposed Swiss paying agent also needs to withhold, tax measures described in this memoran-
changes: albeit only on interest resulting from dum is not expected before calendar year
Swiss (or certain deemed Swiss) bonds, 2012. The measures need to pass the
a) Issuance stamp tax however, not on foreign bonds. With a re- parliamentary process and are potentially
The working party proposes to (i) cipient resident in a country, which has a subject to a referendum before they can
generally abolish the issuance stamp comprehensive tax treaty with Switzerland take effect.
Tax News Ernst & Young April 2011 7

8. EU dialogue with Switzerland – solution within reach?
Markus F. Huber, Doctor of Law (Dr.iur.), Partner International Tax Services Zurich, markus-frank.huber@ch.ey.com
It is well known that one reason was the argument that the Free Trade have to officially declare that the negot-
why multinational companies base Agreement only covered trade in certain iations would start from scratch without
themselves in Switzerland is its fa- goods and could therefore not serve as a any pre-conditions. Furthermore, the
basis for reviewing cantonal tax regimes allegation would have to be withdrawn
vorable tax environment. According to see if they distorted competition. that the cantons were breaching the Free
to the European Commission, this Trade Agreement. Although the detailed
results in a lower tax burden on EU Code of Conduct on “harmful” tax outcome of discussions between the
their corporate profits in certain measures Swiss cantons is not known, it can be
tax systems. Such taxation regimes The EU’s ministers of economic affairs expected that Switzerland will be willing
agreed to the EU Code of Conduct in to accommodate the EU. In addition, the
are a thorn in the Commission’s
1997. The code was designed to elimi- business world is becoming more vocal
side. The dialogue between the and demanding clarity on the future of
nate «harmful» tax competition between
Commission and Switzerland on the regimes in question.
member states. The member states
this issue was ineffective for a long were encouraged not to introduce such The canton of Neuchâtel has already
time, but recent developments measures and to abolish existing ones. presented an «EU-compliant» tax reform
indicate that an agreement is now The Primarolo Group was commissioned package in anticipation of this develop-
closer than ever. The recent discus- and thereupon undertook this task with ment. Under the proposal, the controver-
sions were used to sound out the great zeal. To date, 400 tax regimes have sial tax regimes would make room for the
been investigated, of which more than tax rate of all legal entities to be halved
extent to which Swiss cantons are 100 have ultimately been found to be which would place all companies on a
willing to consider certain changes «harmful». level footing. The draft has an important
at the levels of cantonal and muni- hurdle to negotiate in April when voters
It was already stipulated in the original
cipal taxation. It appears that the go to the polls on this issue.
EU Code of Conduct that the application
cantons are prepared to rethink of the Code’s principles and criteria to There appears to be movement in the tax
certain tax regimes under certain dependent and associated areas – in dispute with the EU. Both sides are willing
conditions, but the result definitely addition to member states – would have to find a solution. There are basically
depends on the approach of EU to be taken into consideration. The three areas that should be followed up
member states as well. new development is that when the EU’s on:
ministers of economic affairs met on 8
June 2010, they expressed their stance 1. Reducing income tax rates.
that non-EU countries would also have 2. Rethinking the subsidization system so
to apply the principles and criteria. At that the cantons whose tax income is
Background the time, the EU’s ministers asked the primarily from companies taxed at the
At the beginning of 2007, the Commission to persuade Switzerland in
Commission informed Switzerland that normal rate can also lower cantonal
particular to adopt the Code of Conduct. and municipal taxes.
it regarded certain cantonal tax regimes The fact that the EU has serious concerns
as instances of state aid for the private about certain cantonal tax regimes is 3. Discussions with the European
sector – which is frowned upon – because confirmed by the fact that, in addition to Commission regarding the Code of
they are applied on a selective basis. the EU’s economics ministers, its foreign Conduct, which should be pursued
It said that this distorted competition ministers also took a clear stand recently. separately from the other two areas.
between companies, thereby restricting At their meeting on 14 December 2010,
trade in goods. The Commission thus they expressed their disappointment However, there are still some political
found these practices incompatible that the long-running dialogue with obstacles that the draft will have to
with the Free Trade Agreement signed Switzerland had still not resulted in the overcome.
between Switzerland and the EU in 1972. abolition of certain cantonal tax regimes.
Switzerland has always rejected this posi-
tion. It pointed out that as a non-member Cantons appear ready for dialogue
state, it was not part of the internal EU After the EU was keen to see quick results
market and was therefore subject neither on cantonal tax regimes rather than
to the competition rules of the European lengthy discussions on the whole EU
Community Treaty such as those on Code of Conduct, the cantons for their
state aid nor to the EU Code of Conduct. part indicated that they were ready for
Equally important for Switzerland’s stance dialogue. Nevertheless, the EU would
Tax News Ernst & Young April 2011 8

9. FATCA regulations will change the financial
services landscape from 2013 onwards
Hans-Joachim Jäger, Partner Financial Services Zurich, hans-joachim.jaeger@ch.ey.com
The Foreign Account Tax holders who fail to properly identify them- now qualify as U.S.-source payments
Compliance Act (FATCA) came selves. U.S.-sourced payment encompass Foreign (non-U.S.) securities held
into effect on 18 March 2010 not only U.S. dividends and interest but directly or indirectly by U.S. persons
when President Obama signed also proceeds resulting from the sale of are now also included in reporting
securities which yield revenues from U.S.
the “Hiring Incentives to Restore • New reporting and withholding
sources.
Employment Act”. FATCA is obligations in addition to those of the
designed to discourage tax abuses It is estimated that the new regulations existing QI regime
by significantly extending and affect hundreds of thousands of finan- • Identification and documentation of
cial intermediaries worldwide, including clients becomes considerably more
intensifying the requirements
banks, brokers, investment companies, onerous, whereby the burden of
laid out in the current Qualified certain insurance companies as well as
Intermediary (QI) regime. proof partly resides with the financial
fund structures. institution
In order to comply with FATCA, insti- • Annual reporting to the IRS on all
tutions must adapt and revamp their assets held by identified U.S. persons
With the QI regime, the U.S. became one operating models, ranging from the iden- and by foreign entities substantially
of the first countries to set their sights tification and documentation of clients, owned by U.S. persons
on taxpayers’ assets deposited abroad, in to the product portfolio and IT systems,
order for these to be disclosed and taxed. through to the internal processes. These
However, until now, these regulations changes must occur group-wide.
only covered U.S. securities which were
held by U.S. persons directly, who have The new regulations, which still need
been disclosed as such to the financial detailed clarification by the IRS and the
intermediary. As a consequence, interpo- U.S. Treasury, have prompted numerous
sing a company or legal entity between discussions among market participants.
the foreign bank and the former account In particular, these discussions relate to
holder, could have resulted in situations questions on future business models,
where there was no reporting to the U.S. such as servicing U.S. clients and / or
tax authorities. holding U.S. securities.
With the intention of closing this There is considerable time pressure,
loophole, FATCA requires all foreign as the new regulations will apply to
financial institutions (FFIs) to enter payments from the start of 2013. The
into an agreement with the U.S. Internal new rules affecting dividend-equivalent
Revenue Service (IRS). With this payments have been in effect since
agreement, the institutions (participating September 2010.
FFIs) undertake to identify certain U.S.
accounts and to report their assets.
Essentially, the term “U.S. accounts” co- Overview of key changes
vers all account relationships that either • Foreign financial institutions are
U.S. natural persons or legal entities, required to enter into an agreement
which are substantially (i.e. more than with the IRS or suffer 30% withholding
10%) held by U.S. persons, maintain with tax on their own and their clients’
such FFI. To enforce compliance with this U.S.-sourced income as well as on any
agreement and to encourage financial sales proceeds resulting from the sale
institutions to enter into such agreement, of U.S. securities
FATCA introduces an impressive threat: • Payments resulting from certain
U.S. withholding agents or participating transactions previously not considered
FFIs are required to impose and deduct U.S.-sourced—e.g. certain payments
a 30% withholding tax from U.S.-sourced under securities lending agreements
“withholdable” payments paid to non- or under swap contracts, which are
participating institutions or those account referenced to U.S. securities—could
Tax News Ernst & Young April 2011 9

10. Switzerland: New Federal Law on the taxation of equity
based compensation schemes to be introduced in 2012
Markus Kaempf, Senior Manager Human Capital Zurich, markus.kaempf@ch.ey.com
Louise Barrelet, Senior Manager Human Capital Lausanne, louise.barrelet@ch.ey,com
The new Federal Law on the taxa- at both at Federal and at Cantonal level, resident in Switzerland, the portion of
tion of equity based compensation under the new Federal Law. However, the the benefit taxable in Switzerland has to
schemes sets out the timing of the main changes relate to the taxation of be calculated on a time-apportionment
stock options, especially in the French basis. The allocation is based on the time
taxation of equity based compen- speaking part of Switzerland, and in spent in Switzerland during the vesting
sation (including restricted stock, cross-border situations. period as a proportion of the total vesting
stock options, restricted stock period. This rule follows the OECD re-
units, stock appreciation rights, According to the new Federal Law, a diffe- commendation published in 2004. In this
rentiation is made between unrestricted regard, it has to be further analyzed how
etc.) as well as the reporting and restricted stock options, as well as
and withholding obligations for the cross-charge of related costs between
between tradable and non-tradable stock foreign and Swiss based companies within
“imported” and “exported” equ- options. the same group will impact the allocation
ities belonging to internationally method. This is due to the Directive
mobile employees. The Swiss Tax issued by the Cantonal tax authorities of
The point of taxation of employee stock
Harmonization Act obliges all Swiss options Zurich in October 2009 which states that
Cantons to implement the new Unrestricted and tradable stock options the amount charged back to Switzerland
Federal Law, with the consequence are taxable at the date of grant and the is the minimum amount subject to
that the tax treatment will be the taxable value equals the fair market income tax in Switzerland. A further
value of the option at grant. Any gain question is whether Switzerland must
same irrespective of which Canton
from selling or exercising the option is have a valid double taxation treaty in
the employee is tax resident within. place with the country from which the
considered to be a tax-free private capital
Nevertheless, based on the appro- gain (unless the beneficiary qualifies as a equities are being exported and imported
ved wording of the new Federal Law, commercial security dealer). to Switzerland. Presently, the Canton of
there is still room for interpretation Zurich only grants an exemption on a
and practical implementation. However, restricted stock options that time-apportionment basis for imported
are not tradable are taxed at the date of equities if the exemption is claimed under
exercise. Consequently, the gain realized a double tax treaty.
On 6 December 2010, after six years at exercise (i.e. the difference between
of debate regarding the wording , the the exercise price and the fair market It is also interesting that the new Federal
Federal Parliament voted for the new value of the underlying share at exercise) Law only addresses stock options for
Federal Law on the taxation of equity is deemed to be employment income and cross-border situations. Consequently,
based compensation schemes. The new is taxed accordingly. the Cantonal tax authorities can still apply
Federal Law is likely to be implemented their own cross-border taxation rules for
Based on the current wording of the new restricted stock units, stock appreciation
from 1 January 2012, unless a citizens’
Federal Law, it is debatable whether stock rights etc.
initiative is undertaken. The proposed
options that have a restriction period
transitional rules, which have not yet
but become tradable after the restriction Extended withholding taxation
been finally approved by the Federal
lapses become immediately subject to According to the new Federal Law, any
Council of Switzerland, stipulate that
tax based on their fair market value at gain that is realized when a taxpayer
equity grants made prior to that date are
the first trading day (i.e. taxation at is no longer tax resident in Switzerland
still taxed under the current Cantonal and
vesting) or if they are also subject to tax but where a portion of the realized gain
Federal rules, , respectively in accordance
at exercise/sale. is subject to tax in Switzerland based
with existing tax rulings. However, if
on the time-apportionment rules (i.e.
the tax year in which the taxable event Stock options that entitle an employee if the taxpayer was at least partially tax
occurred is not yet finally assessed, the to receive a cash payment instead of resident in Switzerland during the vesting
taxpayer can make a claim for a revised acquiring actual shares (either volun- period), the Swiss based company is
tax treatment under the provisions of the tarily or mandatorily) are regarded as obliged to withhold Federal tax at a flat
new law. All equity grants made after the non-genuine participation rights and are rate of 11.5%. On top of the Federal tax,
new law comes into force will be taxed in therefore exclusively taxed at exercise. the employers also need to withhold the
accordance with it. Existing rulings that It is debatable whether an option that is Cantonal/Municipal taxes. In this regard,
either do not fall within the scope of the tradable but envisages a cash settlement it is still unclear what tax rates the Cantons
new legislation or are not in contradiction is taxable at grant or at exercise/sale. will apply (flat or progressive rates).
with it are still valid.
The timing of the taxation of restricted Taxation of equity based compensation Next steps
stock, restricted stock units and phantom plans in cross-border situations Employers should review their current
plans (i.e. non-genuine participation Where stock optionswith a vesting period equity based compensation schemes
rights) essentially remains unchanged, partially vest whilst a taxpayer is tax and related tax rulings in light of the new
Tax News Ernst & Young April 2011 10

11. Federal Law in order to guarantee com- for internationally mobile employees Whenever employees have been resident
pliance from a reporting and withholding because of the possible trailing liabilities in Switzerland during the vesting period or
perspective. Special attention is required in Switzerland and other countries. at exercise, special attention is required.
Current developments regarding Swiss pension funds
Charlotte Climonet, Senior Manager Human Capital Geneva, charlotte.climonet@ch.ey.com
Sandra Beer, Senior Manager Human Capital Zurich, sandra.beer@ch.ey.com
This article contains two current • If the tax deduction has already been apply to the transfer of foreign pension
developments regarding Swiss 2nd accepted, and then a withdrawal is assets into Switzerland if the following
pillar pension funds (occupational subsequently made within 3 years, the criteria are all met for such transfers:
pensions). The first part relates to tax authorities will re-open prior tax
• The foreign pension fund transfers the
years and retroactively disallow the
changes in the tax consequences assets directly to the Swiss pension
deduction.
of making voluntary buy¬-backs of fund.
missing contribution years. In the • In cases where a tax deduction is not
• The rules of the Swiss pension scheme
accepted, the amount that was denied
case of a lump sum capital with- allow for this type of transfer from for-
as a deduction is exempt from taxation
drawal within the blocking period of at the withdrawal.
eign pension funds. It should be noted
three years after the buy-back, the that not all Swiss pension funds will
• The new rules apply to 2nd pillar want to meet the potentially extensive
tax relief is disallowed retrospec-
buy-backs made after 19 August 2010 administrative reporting obligations
tively in the year in which the buy- which was the publication date of
back was made. The second part that may arize through accepting the
the Federal Supreme Court’s ruling. transfer of foreign assets.
deals with the transfer of foreign However the Geneva Tax Authorities
pension assets into Swiss pension For example, the UK pension law
will only apply this rule to buy-backs
funds and the conditions that have requires reporting obligations by the
made after 1 January 2011.
foreign pension fund for a period of
to be met. • In practice, the tax authorities will not five years.
refuse a deduction for 2nd Pillar buy-
• The insured person does not claim tax
backs if the contribution is immaterial.
deductions for the transfer of pension
1. Changes in the tax deductionof For he Zurich tax authorities, the con-
assets.
2nd pillar buy-backs tributions are considered as immaterial
Following a Federal Supreme Court if the buy-back amount is less than CHF The 20% limit continues to apply to any
ruling of 12 March 2010, the Swiss Tax 12’000. The Geneva tax authorities buy-back after foreign assets have been
Conference published guidelines on the have not yet defined any ceilling. transferred into a Swiss pension fund.
tax deduction of 2nd pillar buy backs that • The tax deduction taken at the begin-
should be applied in all cantons. ning of the three-year period could be This type of transfer from abroad is
disallowed retrospectively by the tax limited to the maximum amount the
The publication reports that any excepti- insured person can buy-back as per the
onal 2nd pillar buy-backs will not be tax- authorities in the case of people who
leave Switzerland within the three-year pension fund regulations.
deductible if there is a lump sum capital
withdrawal taken within the three-year blocking period and transfer their If a transfer is being considered, attention
blocking period following the buy-back. pension assets into a vested benefits must be paid to the fact that the purchase
account. contribution for the insured employee
The main points are the following ones: is thereby reduced in the Swiss pension
2. Transfer of foreign pension fund fund. The matter should therefore be
• Tax relief on 2nd pillar pension buy-
assets into Swiss pillar 2 analyzed on a case by case basis.
backs will not be allowed if there is a
Under revised Art. 60b of the Federal
lump sum capital withdrawal within the
Act on Occupational Pensions that has
three-year blocking period following the
applied since 1 January 2011, insured
buy-back. It is not important whether
persons may transfer foreign pension
the withdrawal includes the amounts Next steps
assets into Swiss pension funds as long as
bought back or whether it came from Employers and employees should note
they fulfill certain criteria.
ordinary pensioncontributions. The the following:
three-year blocking period is now According to provisions introduced in
included as an objective criterion for 2006 on the avoidance of tax evasion, 1. The impact of the new tax regulations
assessing tax deductibility. It is no the annual buy-backe amount for insured on purchases into pension funds
longer necessary to prove any tax employees who move to Switzerland from 2. The consequences of transferring
evasion for the deduction to be refused. abroad is limited to 20% of insured salary foreign pension fund assets into Swiss
Exceptions should only be permitted in within the first five years. Under the mo- pension funds for employees who
cases of divorce. dified Art. 60b, this restriction does not relocate to Switzerland.
Tax News Ernst & Young April 2011 11

12. Withholding tax developments for employees
resident in Switzerland and abroad
Andreas Tschannen, Executive Director Human Capital Zurich, andreas.tschannen@ch.ey.com
Lukas Naef, Manager Human Capital Zurich, lukas.naef@ch.ey.com
In assessing the tax situation In the claimant’s case, this meant the following year. It cannot be assumed
of a person resident abroad but discrimination, as individual deductions that the German-speaking Swiss cantons
employed in Switzerland, the are not contained in withholding tax will extend the submission deadline. The
Federal Supreme Court based rates. Based on the anti-discrimination canton of Geneva accepts applications
rules stipulated by the Agreement on the until 31 August of the following year.
its ruling of 26 January 2010
Free Movement of Persons, the Federal
on the anti-discrimination rules Supreme Court granted the claimant the
stipulated by the Agreement on Application for rate adjustment –
same deductions as those enjoyed by cantons with liberal regulations (e.g.
the Free Movement of Persons. residents of Switzerland. As a result of Zurich, Berne, Aargau, Schaffhausen)
Employees residing abroad this decision, individual deductions that
If the canton already granted individual
may not be treated worse than were previously rejected now have to be
granted by cantonal tax authorities. deductions for rate correction purposes
employees residing in Switzerland. before this ruling on international week-
The ruling has since led to day residents, there will be little change
selective adjustments in cantonal to its withholding tax regulations, as
International weekday residents
withholding tax regulations domiciled abroad anti-discrimination rules were not broken.
but has not brought about any This mainly concerns international Applications for calculating corrections
fundamental changes. Cantons weekday residents who are domiciled to withholding tax must be submitted to
with traditionally restrictive abroad and work in Switzerland. A the relevant tax authority by 31 March of
regulations in granting additional number of cantons (e.g. Basel-Stadt, the following year. One exception to this
Basel-Landschaft, Zug, Schwyz) have is the canton of Aargau where correction
allowances for international
until now rejected individual deductions, applications are taken into account up to
weekday residents (e.g. pillar 3a five years after the end of the tax year.
contributions, dual accommodation e.g. there was no deduction for pillar 3a
contributions or dual accommodation
costs, high return travel costs,
costs. Other cantons (e.g. Zurich, Berne, Taxation of foreign working days
etc.) will only examine applications Aargau, Schaffhausen) have already As international weekday residents do
for adjustments to tax rates looked at relevant applications to take in- not have tax residence in Switzerland
and individual deductions on dividual business expenses into account. because they regularly return to their
the condition that 90% of the We should assume that the regulations main residence abroad, only the number
family's worldwide income is will not change much in these cantons. of working days physically carried out in
generated in Switzerland. Cantons “Quasi-residence” – cantons with Switzerland (= Swiss working days) can
with liberal regulations in this restrictive regulations (e.g. Basel-Stadt, be subject to Swiss taxation (provided
area will continue to examine Basel-Landschaft, Zug, Schwyz) that Switzerland has signed a double
granting deductions as part of the taxation agreement with the foreign
These cantons will now permit individual
application to adjust withholding country of residence). The right to tax
deductions for international weekday
non-Swiss working days therefore lies
tax rates. residents if 90% of the family’s worldwide
with the foreign country of residence.
income is generated in Switzerland. Given
Exemption from these foreign working
the example of the canton of Geneva,
days should be applied for in all cantons
it is conceivable that the cantons will
Background by the end of March of the following year
apply ordinary income tax rates in order
On 26 January 2010, the Federal in order to avoid the risk of an application
to avoid discrimination. In addition,
Supreme Court approved the appeal of a being rejected. For example, the Zug Tax
married persons may apply for the
Swiss national who resided in France but Authority tends not to handle revision ap-
married persons’ withholding tax rate,
worked in Geneva. When this national mo- plications based on international double
whereby the family’s worldwide income,
ved residence from Switzerland to France, taxation for those subject to withholding
including interest income, rental income
the income earned in Switzerland became tax if they are submitted after 31 March
and other income, is taken into account to
subject to withholding tax. No longer a of the following year (not so, for
determine the tax rate. Wealth tax is not
resident of Switzerland, this taxpayer instance, in the canton of Zurich where
taken into consideration.
could no longer submit a tax declaration applications will still be accepted after 31
and was therefore unable to benefit Any application must be submitted to the March for a revision, provided the 90-day
from (additional) individual deductions. relevant tax authority by 31 March of revision period has been observed).
Tax News Ernst & Young April 2011 12

13. Foreigners living in Switzerland with a less than CHF 120,000 (otherwise a discrimination rules, it could be argued
permit “B” subsequent assessment is made using the that the municipal tax base should also be
For foreign employees who live in tax form). As the withholding tax rate is used in cases where gross annual income
Switzerland but have no permanent based on a weighted average of municipal is less than CHF 120,000. However, there
residence permit “C”, withholding tax tax rates in the canton, these foreign em- has not yet been a seminal court ruling
deduction normally represents the final ployees cannot benefit from a favorable on this matter.
tax charge if gross annual income is municipal tax base. Bearing in mind anti-
VAT classification criteria service contracts /
property purchase contracts
Susanne Gantenbein, Senior Manager Indirect Tax Geneva, susanne.gantenbein@ch.ey.com
Simone Wassmer, Manager Indirect Tax Bern, simone.wassmer@ch.ey.com
The tax position of construction Land belongs to the developer: tax-exempt without credit, and taxable
self-supply has been abolishedd A sale (land and building) is normally goods and services have been supplied in
under the new VAT Law. Now the tax-exempt without credit if the following respect of the building.
distinction between taxable service criteria have all been met:
Land belongs to the purchaser:
contract and tax-exempt purchase • The purchaser acquires an off-plan
If a property is being developed that
contract is the crucial issue. property for which a development
already belongs to the purchaser (cus-
The Federal Tax Administration project is in place;
tomer), this always means that taxable
(FTA) published its practice, • A fixed price (set in advance by the goods and services are being supplied.
retrospectively applicable from developer) is paid for the land and
1 July 2010 (voluntary from buildings; Land belongs to a third party:
1 January 2010), on making this • The purchaser can only exercise In this instance, usually only the sale of
distinction in its VAT Info 04 limited influence on the construction, the land is tax-exempt without credit.
(construction). Under the previous structure and design of the building Construction of the building is classified
(including work in surrounding areas) as a taxable supply of goods and services.
VAT Law, it was a question of
and service providers (tradesmen); It is normal practice to deviate from this
whether purchase or pre-purchase
• There is only one contract (purchase rule if the purchaser of the land and the
contracts were in place prior to the developer are closely related parties.
start of construction, but now it contract between developer and
purchaser of land and building); In this instance, the same classification
is important to determine who the criteria apply as if the land belonged to
land being developed belongs to, • Risk and use are only transferred to the developer.
when payment is made and whether the purchaser upon completion;
The criterion of additional costs not
there are extra costs to the fixed • Payment is made only after the buil-
exceeding 5% (or 7%) of the fixed price in
price offered for the land and ding has been completed and is ready
particular may mean that a final assess-
for occupation (a down payment of up
building due to changes based on ment of the nature of the contract is only
to 30% of the purchase price is still in
individual purchaser requirements1. possible retrospectively. To counteract
line with this criterion).
any risks, the contracts should ideally be
analysed from a VAT perspective before
If not all of these criteria have been met
the project starts.
or if the additional costs exceed 5% of
the fixed price (7% if the land is not sold The authors will be happy to answer any
by the developer but a building right is questions from affected companies about
granted), only the sale of the land is the above issues.
1
Even before publication of the definitive practice by the FTA, Hans Rutschmann submitted a
«removing VAT barriers on property sales» motion (10.4030) on 16 December 2010 in the
National Council. The motion has not yet been dealt with in the assembly. It is geared specifically
towards the criterion of funding and calls for the beginning of construction as the relevant time
for the distinction, as was formerly the case.
Tax News Ernst & Young April 2011 13

14. Ernst & Young
Assurance | Tax | Transactions | Advisory
Potential new regulations relating to inter- Ernst & Young is a global leader in
assurance, tax, transaction and advisory
mediation services in the financial sector services. Worldwide, our 141,000 people
are united by our shared values and an
unwavering commitment to quality. We
Barbara Henzen, Partner Indirect Tax Zurich, barbara.henzen@ch.ey.com
Olivia Schwarz, Senior Consultant Indirect Tax Zurich, olivia.schwarz@ch.ey.com
make a difference by helping our people,
our clients and our wider communities
achieve their potential.
Ernst & Young refers to the global
The definition of taxable finder's If intermediation is not based on a organization of member firms of
fees in the financial sector could specific sales transaction or is unrelated Ernst & Young Global Limited (EYG),
change, with the result that more to transactions that are subsequently car- each of which is a separate legal entity.
ried out by the customer, there has been EYG, a UK company limited by guarantee,
services in this area will be exempt does not provide services to clients.
no intermediation under Art. 21 para. 2
from tax in future.
point 19 letters a) to e) of the VAT Act. In Switzerland, Ernst & Young Ltd is a
Instead, such acquisition of customers leading audit and advisory company
According to the draft VAT Sectors is to be viewed as a service in the field offering services with about 2,000
Information 14 “Financial Sector”, inter- of advertising or providing information. employees at 10 locations also in the area
mediation under Art. 21 para. 2 point Irrespective of how the corresponding of tax and legal, as well as in transactions
19 letters a) to e) of the VAT Act should and accounting.
compensation is determined, it is taxable
now be taken to mean any activity carried according to the type of service supplied For more information about our
out by an intermediary that consists of in each given case. organization, please visit www.ey.com/ch
working towards concluding a contract in
monetary or capital transactions between If the change provided for in the draft
two parties without the intermediary comes into force, it may have a major
being a party to that contract and without impact in terms of sales (more exempt
having self-interest in its contents. sales for intermediaries and therefore
lower input tax deduction rates) and in
Intermediation may involve providing a terms of input tax deduction (lower input
contractual party with opportunities to tax charge for those who purchase these Imprint
conclude a contract, making contact with services). We therefore recommend
Tax News
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on the details of reciprocal services. It of the brochure has been published.
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brochure and is as follows:
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Tax News Ernst & Young April 2011 14