Artikel auf Englisch
While this reform primarily aims to abolish the privileged tax regimes, it also proposes new measures to preserve Switzerland's tax competitiveness. This is the case, for example, of the declaration of hidden reserves, which could be of interest to your entity if it benefited from a holding company or auxiliary company tax regime until 31.12.2019.
Indeed, this measure allows a gradual switch from preferential taxation to ordinary taxation, which ensures competitive taxation over a five-year transition period.
The Geneva tax authorities have recently published on their website the application modalities. We present below the outlines of these rules. The application of the declaration of hidden reserves at the exit of the cantonal tax regimes requires the following procedure:
1. Assess and identify your eligible hidden reserves | - Eligible hidden reserves include hidden reserves and self-generated value created by the taxpayer (including goodwill).
- Hidden reserves on participations and real estate are not taken into account.Eligible hidden reserves are determined on the basis of a business valuation method. The Geneva tax authorities will apply the practitioner's method ("méthode des praticiens") in accordance with the provisions of Circular n°28 of the Swiss Tax Conference. The application of another method (e.g. the Discounted Cash Flows (DCF) method) will be admitted provided that its use is justified and documented.
|
2. Establish the potential for reduced rate taxation | - The potential for reduced rate taxation is determined on the basis of the eligible hidden reserves after deducting the commercial losses not offset for tax purposes as of 31.12.2019. Only the share of these hidden reserves related to foreign-source activity (based on the average percentage of foreign-source income in recent years) will be eligible for reduced rate taxation.
|
3. Declare your eligible hidden reserves and your potential for reduced rate taxation | - A formal request for a tax ruling including the declaration of hidden reserves form as established by the Geneva tax authorities must be filed.
- The application must be submitted as soon as possible in order to claim the eligible hidden reserves in the 2020 tax return.
|
4. Receive a formal decision from the Geneva tax authorities | - In the absence of a decision by the Geneva tax authorities at the time of the filing of the 2020 tax return, it is imperative to declare the claimed amount of eligible hidden reserves.
- An application for a ruling as well as the decision of the tax authorities will not generate an obligation for spontaneous international exchange of information.
|
5. Report your hidden reserves in your tax returns from 2020 to 2024 | - Once admitted by the Geneva tax authorities by obtaining a ruling, these hidden reserves will be taxed at a reduced rate of 13% (reduced effective rate for cantonal/communal tax (City of Geneva) and direct federal tax for 2020) instead of the rate of 13.99%, for a maximum period of five years, starting from the 2020 tax period.
- Other profits will be subject to the ordinary rate (in particular earnings from participations and/or real estate income).
|
Our experts are at your disposal to help you determine your potential tax savings that could result from this measure, as well as to assist you in this process.
