Nexia European tax group meeting - Amsterdam 5th/6th February 2009 Daniel Althaus ABT Treuhandgesellschaft Andreas Baumann & Co. Zürichstrasse 27b 8134 Adliswil

Taxation in Switzerland – latest developments February 2009

Agenda 1.Swiss taxation at a glance 2.Holding, domiciliary and mixed companies 3.Political differences EU-Switzerland 4.Latest developments 5.Art DTT Germany « leitende Angestellte »

Swiss tax system  One Country (federal)  26 Cantons (different cantonal taxes)  2,100 Communities (different community taxes)  However, Harmonization Act  Politically stable country (almost same parties in power for over 50 years)  Tax payers regarded as “clients” not potential “offender” by tax authorities  Tax rulings with tax authorities are commonly related to decisive tax matters – gives stability and comfort in tax planning  Tax evasion versus tax fraud

Taxation at a glance  Corporate Income Tax (%)  Capital Gains Tax (%) 0  Branch Tax Rate (%)  Withholding Tax: - Dividends (%) 35 - Interests (Commercial loans/intercompany - banks) 0/35 - Royalties (%) 0  Branch Remittance Tax (%) 0  Net Operating Losses Carry Forward (years) 7  Value Added Tax (%) 7.6

Corporate Income Tax 1.Federal (8.5% pre-tax) Cantons & 3.2,100 Communities (%) Total (%) 12 – 24 Zurich 21 Herrliberg (Zurich) 19 Zug 16 Appenzell 12 Geneva 24 Exemption on dividend income/sale of participations (substantial participations)

Miscellaneous Matters  Holding Companies (taxation only on federal level)  Domiciliary and Mixed Companies (taxation almost on federal level)  Intercompany interest rates (arms’s length principle/save heaven rules)  Debt-to-Equity Rules (arms’s length principle/ save heaven rules)  Foreign Exchange Controls (none)  Transfer Pricing (arms’s length principle/TP methods by OECD, cost plus still common)  Reorganisations (e.g. mergers demergers are tax neutral)  Double Tax Treaties (with over 70 countries – OECD model)  Swiss-EU Agreement (EC parent subsidiary directives 1990: dividends not subject to tax)  Swiss-EU Agreement (Social security: EU regulation 1408/71)  Swiss-EU-Savings tax on interests

Holding company  Tax status only on federal level (political discussions with EU)  Tax rate 7.8 %  Treaty access yes  Capital duties 1 % stamp duty on equity  Dividend taxation exempt  Financing costs deductible (however, reduction of participation exemption)  CFC rulesnone  Investments must cover 2/3 of assets or income

Domiciliary and mixed company  Tax status fully on federal level partly on cantonal/communal level (political discussions with EU)  Tax rate 9-12%  Treaty access yes (however: misuse/ CFC regulations in Germany, Italy)  Capital duties 1 % stamp duty on equity  Foreign source incomein fact partly exempt  Swiss source income fully taxed  CFC rulessee above (several countries)

Mixed company (canton of Zug)

Differences with EU omiciliary and mixed companies  Different treatment of foreign and Swiss source income in holding, domiciliary and mixed companies  EU: « Form of unallowed government aid – against free trade agreement 1972 »  Switzerland: « Part of federalistic tax competition »  No forseeable solution in the next future  Potential solution: 1.Holdings: General ban on business activities 2.Mixed companies: Modifications in provisions 3.Domiciliary companies: Abolition of such a status 4.Reduction of tax rate on the federal level in order to keep Swiss tax system competitive

Planned tax reforms  Abolition of issue tax on equity and dept capital  Waive of Capital tax on Cantonal level  Adjustments to the system of participation relief for corporate bodies

Recent agreement on Art DTT with Germany (management « leitende Angestellte ») Germany (resident and work) no German income tax Swiss income excempt – Art 24 DTT Swiss Corporation, Zug „leitender Angestellter“ Salary CHF 100‘000 Swiss Income tax 22‘000 (source tax Zug)

Recent agreement on Art DTT with Germany (« leitende Angestellte »)

 “Verständigungsvereinbarung” dated :  “Leitender Angestellter” if at least procura or leading function is registered in the Swiss commercial register

Thank you for your attention Daniel Althaus ABT Treuhandgesellschaft Andreas Baumann & Co. Zürichstrasse 27b 8134 Adliswil