Effective 1 January 2025, various tax provisions came into force. These range from the introduction of the International Income Inclusion Rule (IIR) to the partial re.vision of VAT legislation concerning platform taxation, and the reduction of the import exemption threshold for travelers to CHF 150. In the following, the most important points of the new regulations coming into force are briefly summarized
INTRODUCTION OF THE INCOME INCLUSION RULE (IIR)
On 4 September 2024, the Federal Council decided to implement the International Income Inclusion Rule (IIR), effective 1 January 2025. The IIR ensures that profits of foreign subsidiaries of Swiss corporate groups and intermediary holding companies of foreign corporate groups are taxed at a minimum rate of 15%. This applies to corporate groups with a global turnover of at least EUR 750 million.
Without the IIR, other countries would, under the OECD/G20 minimum taxation rules, have the right to tax these foreign profits through the so-called Undertaxed Profits Rule (UTPR). Switzerland has decided not to implement the UTPR for the time being.
Further information can be found under this LINK
PARTIAL REVISION OF VAT LEGISLATION
Also, the partially revised VAT Act and the partially revised VAT Ordinance will come into force on 1 January 2025. In particular, the changes in connection with platform taxation should be emphasized. Operators of electronic platforms that facilitate a delivery as an intermediary between buyer and seller and the conclusion of a corresponding contract on their platform are now expressly deemed to be service providers vis-à-vis the buyer. Specifically, the supply is divided into two fictitious deliveries, whereby the first delivery between the seller and the platform operator is exempt from tax and the second delivery between the platform operator and the buyer is taxed.
Further details, including other VAT-related changes, are available under this LINK
MANDATORY REPORTING BY TAX AUTHORITIES FOR DELAYED SUBMISSION OF ANNUAL FINANCIAL STATEMENTS
The introduction of the Federal Act on Combating Abusive Bankruptcy is accompanied, among other things, by the implementation of Art. 112 para. 4 of the Federal Act on Direct Federal Taxation. According to this provision, the tax authorities are required to report to the commercial register office if no signed annual financial statements were filed by the company within three months of the expiry of the relevant deadlines. In addition, creditors under public law, such as the tax authorities, must file for bankruptcy if the debtor is entered in the commercial register.
Further information can be found under this LINK
FLEXIBLE TAXATION OF ANNUITIES STARTING IN 2025
From 2025, in fulfilment of the motion ‘Stop the tax penalty in Pillar 3b’, the taxation of life annuities in Pillar 3b will be flexibly adapted to the respective investment conditions. This will eliminate the previous systematic over-taxation of pension benefits and significantly mitigate the tax on redemption and buyback of life annuity insurance policies. Until now, a flat-rate income component of 40 per cent of pension benefits was taxed and the remaining 60 per cent was treated as a tax-free capital repayment. From 1 January 2025, the taxable income portion of the guaranteed pension benefit for life annuity insurance policies within the meaning of the Insurance Contract Act will be based on FINMA's maximum interest rate. Surplus benefits that exceed the guaranteed annuities will be taxed at 70 per cent. The taxable income portion of current life annuities is subject to withholding tax and must be reported annually by the insurance companies to the FTA. These reports are forwarded to the cantonal tax authorities for control purposes.
Further information can be found under this LINK
RETROACTIVE CONTRIBUTIONS TO PILLAR 3A
From 1 January 2025, it will also be possible to pay missed contributions into Pillar 3a retrospectively on a tax-privileged basis. From 1 January 2025, anyone who has made no or only partial contributions to a tied pension plan (‘Pillar 3a’) will be able to retroactively make up for these contributions for up to ten years and deduct them in full from their taxable income. Specifically, in addition to the regular contributions per year, it will be possible to make a purchase up to a maximum of the so-called ‘small contribution’. The following conditions apply to a retroactive purchase:
- The individual must have AHV-obligatory income in Switzerland in both the year of the contribution and the year for which it is made retroactively.
- The full annual contribution for the respective year must be made before retroactive contributions are allowed.
It should be noted that the aforementioned changes only apply to contribution gaps from 2025 onwards, which means that purchases can be made retroactively for 2025 for the first time in the 2026 tax year. Payments for missed purchases before 2025 are therefore not possible.
Further information can be found under this LINK
TAXATION BASIS FOR TELEWORKING CROSS-BORDER COMMUTERS
In principle, the right to tax income from employment according to double taxation agreements is determined by the place where the work is physically carried out. In the case of teleworking, the right of taxation would therefore change from the employer's country of domicile to the employee's country of residence.
The amendment to the law now creates an internal legal basis for the taxation at source of employees who are not resident in Switzerland for tax purposes and who work for a Swiss employer from a neighboring country in a home office.
This regulation is closely linked to the international agreements on the allocation of taxation rights between Switzerland and its neighboring countries. The supplementary agreements with France and Italy create the possibility for teleworking for a Swiss employer to continue to be taxed in Switzerland up to a certain level, even if the work is not carried out locally. Specifically, the supplementary agreement with France allows taxation by Switzerland if up to 40 per cent of working hours are performed outside Switzerland. Under the protocol with Italy, an upper limit of 25 per cent of working time applies.
The new taxation basis is aimed at implementing the above-mentioned international treaty provisions and ensures that Switzerland can exercise its right of taxation accordingly.
Further information can be found under this LINK
REDUCTION OF IMPORT EXEMPTION THRESHOLD FOR TRAVELERS
With the amendment to the Federal Department of Finance ordinance on the tax-exempt importation of goods in small quantities, of insignificant value or of a negligible tax amount, goods for the private use of travelers may only be imported tax-free up to a total value of CHF 150 (previously: CHF 300) per person and day. If the total value exceeds this limit, Swiss VAT must be paid on the imported goods.
Further information can be found under this LINK