PwC Actuarial Services

The actuary of today – inside look into actuarial modernisation

The PwC Actuarial Services Newsletter is a joint venture of three of our worldwide PwC actuarial practices. In recent years, there have been a number of collaborations on client projects, initiatives and content development between the three entities, Switzerland, Germany and the Netherlands. This newsletter will examine current topics of the industry from different regional and thematic perspectives, and is aimed at insurance professionals working in or closely with actuarial departments.

Read more about the following topics:

Topic 1: Towards efficient ORSA through communication
Topic 2: ORSA – An actuarial challenge
Topic 3: Getting ready for Solvency II – Actuarial Function

Please contact me for any further information.

Modification of the federal ordinance on the granting of federal tax holidays

In March 2015 the Federal Council published a report on the contemplated modifications of the federal ordinance on the granting of federal tax holidays in application of the new regional policy. The consultation draft of the new federal ordinance can now be commented on by interested parties until July 8, 2015; entry into force of the final version is planned for July 1, 2016.

We have set out below a summary of the most relevant aspects of the consultation draft.

A) Granting of tax holidays according to current tax practice

As part of its regional policy, the Federal Council is endeavouring to strengthen the competitiveness of certain geographical areas. Under the terms of article 12 of the Federal Law on Regional Policy, federal tax holidays can be granted to industrial companies or production-related service providers located in structurally weak geographical areas that are willing to create new jobs or to maintain existing ones.

The cantons are responsible for submitting applications for federal tax holidays in accordance with the Federal Law on Regional Policy. A tax holiday applicant may only obtain a federal tax holiday if the canton of residence has already granted a tax holiday at cantonal/municipal level. The cantonal economic development agencies provide advice about the procedure.

Under current practice, a federal tax holiday can only be granted if the cantonal tax holiday decision contains a claw-back clause. The maximum duration of the tax holiday is 10 years, usually split into a first period of 5 years that is extended for a second period of 5 years if all the tax holiday conditions are met.

Source :

B) Proposed modifications – new federal ordinance

The purpose of the current publication is only to highlight the material and procedural amendments the Federal Council wants to implement.

The amended federal ordinance should enter into force on July 1, 2016. Until then, the current practice will remain applicable. It is also worth mentioning that the amendments proposed by the Federal Council should not have a direct formal effect on cantonal tax practices; some cantons may, however, decide to change current practice and follow the new federal rules. This will have to be monitored in due time.

a.      Regional restrictions for federal tax holidays (articles 2 and 3 of the new ordinance)

The areas in which a taxpayer could apply for a federal tax holiday were significantly restricted in 2010. Currently, approximately 633 towns are located in the regions benefitting from the tax holiday.

Based on the amended federal ordinance, tax holidays may be granted to companies located in municipalities considered to be rural centres, small or medium sized urban centres including the surrounding areas (i.e. Alternative 2 – 136 cities), or alternatively smaller and less urban areas with a central function (i.e. Alternative 4 – 157 cities).

b.      Introduction of a cap for the determination of the tax holiday

Federal tax holidays will be subject to a cap determined using a specific formula (article 11 of the new ordinance). According to the current estimates made by the Federal Council, each new job created could lead to a tax credit ranging from CHF 71,594 to CHF 143,188 per year; each job retained should lead to a tax credit ranging from CHF 35,797 to CHF 71,594 per year.

The cantons should still be able to determine the method used to fix the cap in granting tax holidays in their own right (i.e., application of the tax credit similar to the federal approach or of a percentage of exemption).

c.       Transparency of tax holidays

Once a year the State Secretariat for Economic Affairs (SECO) will publish information connected with newly granted federal tax holidays, e.g., the name of the company, its location, information on the magnitude of the cap on the tax holiday and the number of jobs to be created or saved. Nevertheless, the effective amount of the tax credit granted will not be disclosed. In principle, no information will be published in connection with cantonal tax holidays.

Only a new tax holiday granted under the amended terms of the federal ordinance will be subject to public disclosure; tax holidays granted under the current version of the federal ordinance will not be affected by this new provision.

d.      Miscellaneous

In application of the proposed federal ordinance, compliance with the conditions for the tax holiday will have to be certified by the company’s statutory auditors. This rule will only apply to the tax holidays granted by the federal authorities after the new ordinance enters into force.

Similar to current practice, provisions for a claw-back will still be included when a federal tax holiday is granted.

The conditions for granting a federal tax holiday will not be drastically modified. Here are the main conditions to be met to be granted a federal tax holiday:

(i)   The canton has agreed to grant a cantonal tax holiday to the company

(ii)   Tax holidays may be granted to newly created companies or to companies developing a new activity

(iii)   At least 20 new jobs will be created.

C) Conclusions

The tax holiday practice at federal level is clearly defined and should be seriously taken into consideration when non-Swiss entities contemplate expanding in Switzerland.

The prospect of a future decrease in cantonal tax rates within the framework of Corporate Tax Reform III creates great incentives for multinational companies.

Our tax specialists remain at your disposal should you want to discuss in detail the possibility of being granted a tax holiday according to current or future practice.

Daniel Gremaud
Avenue C.-F. Ramuz 45
Case postale, 1001 Lausanne
+41 58 792 81 23
Gil Walser
Avenue C.-F. Ramuz 45
Case postale, 1001 Lausanne
+41 58 792 67 81

Capital Markets 2020: Will it change for good?

We believe that capital markets in 2020 will look very different than they do today. Based on Capital marketsfeedback from clients, many have gloomily predicted a shrinking capital markets landscape, overregulation and the fall of traditionally powerful financial centres such as London and New York. However, we have a different vision for 2020 – one of a new equilibrium. This new equilibrium consists of a traditional financial axis of power further solidifying their positions at the top and the world seeking stability and predictability in the context of riskier and more uncertain geopolitical situations. In addition, much of the landscape where financial institutions operate will change significantly. This change will come from economic and government policies, innovation, operational restructuring, technology, from smarter and more demanding clients, companies harnessing powerful data and from continued growth of the shadow banking system.

Read more here.

FATCA Updates – April 2015

IRS IDES Updates

The IRS has recently updated a number of the websites and resources for the FATCA IDES including the IDES User Guide, which includes new enhancements for reporting and other instructions, and the FAQs to update certain responses and add others.

The IRS has also published examples to explain how to create an IDES data packet and decrypt a notification. The three examples on data preparation for Java, .NET, and OpenSSL can be found on GitHub.

IGA Updates

Cayman Islands

The Cayman Islands Department for International Tax Cooperation (DITC), on April 16, 2015, released Version 1.2a of the Cayman Island Automatic Exchange of Information Portal User Guide.  The User Guide provides clarification on the notification process by sponsoring Cayman financial institutions (Sponsoring FIs) with respect to sponsored Cayman FIs (Sponsored FIs) and filing a nil return (FATCA Reports). The three critical clarifications in the updated User Guide are: (1) Sponsored FIs do not have to provide a notification on the AEOI Portal; (2) the Sponsoring FI must provide notification (regardless of whether reporting is required) with its own global intermediary identification number (GIIN); and (3) filing a nil return is not mandatory.

For more information, please see our recently published PwC Tax Insight.


On 30 March 2015, the Luxembourg parliament published the draft law (in French) and released it for discussion on the 27 March 2015 by the minister of finance. This long-awaited draft law aims at adopting the IGA signed one year before on 28 March 2014 and under the terms of which FATCA will be applied in Luxembourg. In addition to the IGA itself, some new obligations and sanctions are developed in the law, with the obligation to inform the reported client prior to reporting likely being the most important.

For more information, please see our recently published PwC Flash News.


The filing deadline for Reporting Malta Financial Institutions has been extended to 15 June 2015.  Reporting Malta Financial Institutions will not suffer any applicable penalties provided that the information that is required to be reported for FATCA purposes is submitted to the commissioner not later than 15 June, 2015.

The commissioner further informs that this exception will apply for 2015 only.

More information can be found on the Inland Revenue Authority of Malta’s Website.



The Seychelles Revenue Commission has issued a circular on information that financial institutions are required to report under the U.S. Foreign Account Tax Compliance Act agreement.


The filing deadline for Reporting SGFIs to submit their first FATCA reporting data has been extended to 31 July 2015 (from 31 May 2015). This extension was provided to allow sufficient time for FIs to obtain public certificates for enrolling into the IDES, to prepare the reporting packet in accordance with the IRS’s requirements, and to conduct IDES testing, if desired, prior to the submission of account data.

More information can be found on the Inland Revenue Authority of Singapore’s Website


As published in the Spanish Official Bulletin on 12 March, an Order (in Spanish) was included to extend the deadline for FATCA reporting under the IGA until 31 May 2015.


On 3 April 2015, U.S. Ambassador to Uzbekistan Pamela Spratlen and Chairman of the State Tax Committee of Uzbekistan, Botir Parpiyev, signed the Intergovernmental Agreement (IGA) to improve International Tax Compliance with respect to the Foreign Account Tax Compliance Act.

Room for growth

room for growthEuropean cities hotel forecast for 2015/16

European cities hotel forecast 2015 and 2016 analyses trading trends and gives econometric forecasts for 20 cities, all national or regional capitals of finance, commerce and culture. This year, in addition to the economic and travel outlook, we also look at some thought provoking predictions for 2015 and their potential impact on hotels; as well as the impact of strong hotel trading on the deals outlook in Europe.

Click here to download the forecast.

Please contact me if you have any further questions.

Fundamental Review of the Trading Book

It is getting serious…

Fundamental changes are coming up for the banking industry. In course of its aim to increase the stability of the financial system, the Basel Committee is going to make substantial changes to the way required capital for market risks is calculated – and after the recently published consultative paper “Fundamental Review of the Trading Book: Open Issues”, it becomes quite clear what form these changes will take.

Not just about the trading book

The Basel Committee aims to specify the boundary between the trading and the banking book more clearly and unambiguously. While still keeping the intention to trade, hedge and profit from short-term price fluctuations as a guiding principle, the Committee gives strict rules and assumptions about which book certain positions must be allocated. In particular, positions which nowadays can safely be held in the banking book might be switched to the trading book in the new setup. Even in cases where no trading book is needed currently, under the new guidelines the need for a trading book might arise.

The new standard approach – taking sensitivities into account

While the Basel Committee originally suggested calculating required capital based on future cash-flows, it now favors a sensitivity-based approach (SBA) due to feasibility concerns from the financial industry. This new approach directly uses risk measures, the sensitivities, to compute the required capital, therefore, the required capital is directly connected to the risk of the portfolio. However, this also poses challenges regarding data availability and quality as all the sensitivities and fundamental information of the instrument for correct bucketing must be available. In particular, missing fundamental data could lead to instruments being mapped to the residual bucket, which would result in a significant increase in the required capital.

Though challenging, the new approach has the potential to increase the stability not only of the financial system but to secure each individual bank. Have a look at the attached flyer to get more detailed information or contact us directly to discuss the upcoming challenges for your business.


Sanctions: US action on cyber crime

On 1st April, President Obama issued an Executive Order (“EO”) giving the US Government the right to respond to cyber attacks. The US is the first country to take the step of establishing a economic sanctions programme in response to alleged cyber attacks. This was not an “April fool” spoof, but the timing could have made people think twice.

The EO will potentially impact both individuals and other entities (called Specially Designated Nationals (SDNs) or “designees” for short) if they are seen as responsible for attacks that are based on “cyber enabled activites”which threaten the national security, foreign policy goals, economic health, or the financial stability of the US.

The White House blog has explained that the EO will be used to impose targeted sanctions against the “worst of the worst” malicious cyber actors, as well as companies that knowingly use stolen trade secrets.

Specifically, the EO authoriszes the Treasury Department’s Office of Foreign Assets Control (OFAC) to freeze the designees’ assets.

Although no one has have yet been named, we think this EO was issued with specific threat actors in mind and we may expect designations to follow shortly. Given the EO’s broad scope that covers “entities” (including foreign governments and their affiliates), it may also be used to helpdeter state-sponsored cybercrimes.

Once designees are announced, US persons, companies and financial institutions should then take steps to ensure they do not engage in prohibited dealings with them. Additionally, the EO suspends any entry into the US by any individuals determined by OFAC to meet the criteria for designation.

Designation could have much wider consequences for businesses outside of the US, because an entity in which an SDN has a 50 percent or greater interest is also blocked. This means U.S. persons and businesses may not engage in negotiations, or enter into contracts, or process transactions involving a blocked individual when that blocked individual is acting on behalf of the non-blocked entity that he or she controls.

As we have seen in the recent past financial institutions who do not comply with their sanctions related obligations can be exposed to significant criminal and civil penalties for violations of the US International Emergency Economic Powers Act (IEEPA) or other US state based state legislation.

Companies doing business in the critical infrastructure sectors listed below should also monitor any future designations of persons or entities as Specially Designated Nationals (SDNs), and consider developing an initial plan for compliance. If you are working in the industries or contracting with them in the US, then take note.

The US Government defines “critical infrastructure sector” as:

  • Chemical;
  • Commercial Facilities;
  • Communications;
  • Critical Manufacturing;
  • Dams;
  • Defence Industrial Base;
  • Emergency Services;
  • Energy;
  • Financial Services;
  • Food and Agriculture;
  • Government Facilities;
  • Healthcare and Public Health;
  • Information Technology;
  • Nuclear Reactors, Materials, and Waste;
  • Transportation Systems;
  • Waste and Wastewater Systems.

In addition, institutions that are targeted by cyber criminals will see an increase in government inquiries to assist them in building cases against potential targets of these new sanctions.

The EO does not define “cyber enabled activities,” but OFAC stated in its FAQs that it will likely define the term to include any act that is primarily accomplished through or facilitated by computers or other electronic devices.

Please contact me if you have any further questions.

Developing female leaders

gender mobilityAddressing gender bias in global mobility

In many global organisations, international experience is viewed as a pre-requisite for executive and leadership roles. With just one in four outbound expatriates from Australia being female, organisations may unintentionally be limiting the progression of their high potential female employees. By exploring and addressing the barriers to female mobility, there is an opportunity to enhance both individual careers and organisational performance.

A year-long joint research project between PwC Australia and Melbourne University’s Centre for Ethical Leadership (CEL) has explored this issue in depth. Using data from interviews with Human Resources leaders, online surveys of both female and male assignees, academic literature reviews and PwC’s expatriate tax client base, a number of “hotspots” for gender bias in the assignment lifecycle have been identified. In this report we explore those bias hotspots, and provide seven strategies oganisations can employ to increase female participation in global mobility programs.

Organisations which are ready to take active steps to increase female participation in global mobility stand to benefit from developing and retaining female talent, and the positive impact this will have on diversity of their future leadership teams.

With the diversity agenda in global mobility lagging so far behind the progress made in other aspects of diversity in recent years, there is a pressing need for change.

Please contact me if you have any further questions.

News on IFRS: April 2015

Our latest IFRS news contains some information about revenue recognition, leasing and IFRS 15 implementation issues.

Boards propose changes for revenue; FASB delays effective date one year

The IASB and FASB continued to discuss implementation issues related to the new revenue standard in March. The FASB met separately to delay mandatory effective date for US GAAP by one year to 2018 with early adoption permitted in 2017.
Read more…

Balance sheets to swell as new lease proposal ready for ballot

Jessica Taurae, Partner in Accounting Consulting Services, looks at the status of the IASB’s long running project on leasing.
Read more…

Revenue TRG continues debate

The Revenue Transition Resource Group (TRG) met for the fourth time in March to discuss implementation issues related to the new revenue standard.
Read more…

Cannon Street Press

  • IC discussion of IFRS 11
  • Leasing project
  • Disclosure initiative
  • Conceptual framework

Read more…

Know your IFRS ‘ABC’: Y is for Yields on government bonds and other discount rate issues

Frances White from PwC’s Accounting Consulting Services in Australia takes a look at discount rates for provisions and impairment, and the effect of an uncertain economic climate.
Read more…


Are you interested in more regular updates?

In brief – A look at current financial reporting issues

IFRS in brief


Federal Council sets parameters for dispatch of the Swiss Corporate Tax Reform III


Today, the Swiss Federal Council published the main parameters/measures which are to be addressed in the Swiss Corporate Tax Reform III (CTR III) proposal, which is to be submitted to the Swiss Parliament in June 2015.

Summary of the Swiss Federal Council’s communication

The parameters, published by the Swiss Federal Council today, are based on the results of the consultation on the draft CTR III bill. The draft bill was published in September 2014 and contained a variety of new measures with the objective of maintaining and fostering Switzerland’s competitiveness as a business location, while at the same time resolving the tax controversy with the EU and also taking into account international tax developments.

Based on the findings of the consultation process, the Swiss Federal Council has given instructions to make various adjustments to the draft CTR III bill published in September 2014. The parameters set out by the Swiss Federal Council can be summarised as follows:

  • Abolition of certain current tax rules including cantonal holding, administrative and mixed company status.
  • Introduction of a Swiss Patent Box at cantonal level. This measure is subject to modifications, taking into account the latest international developments at OECD level.
  • Optional introduction of an input tax super deduction for research and development costs at cantonal level.
  • Reduction of the annual cantonal capital tax.
  • Abolition of issuance stamp tax on equity capital.
  • Introduction of comprehensive rules regarding the treatment of hidden reserves and goodwill (“step-up”).
  • Harmonisation of partial taxation rules on dividend income for private individuals.
  • Reduction of cantonal income tax rates at the discretion of the individual canton.

The Swiss Federal Council decided not to further pursue the following measures, which were part of the draft CTR III bill:

  • A capital gains tax on privately held securities by individuals shall not be introduced.
  • The proposed changes to the participation exemption and the suggested changes regarding tax loss carry forward rules will no longer be pursued.
  • As the introduction of an interest-adjusted profit tax (i.e. notional interest deduction – NID) was controversially discussed during the consultation phase and a majority of the cantons were against the introduction of NID, the Swiss Federal Council has decided, for now, to exclude the NID proposition from the reform proposal.

In addition, the Swiss Federal Department of Finance (FDF) is requested to review whether a tonnage tax should be introduced. Furthermore, the Swiss Federal Council proposed an adaptation of the fiscal equalisation rules – the Federation will participate by absorbing half of all costs which may be triggered by the cantons when reducing their cantonal income tax rates.

Next steps

As a next step, the Swiss Federal Council has instructed the FDF to prepare a dispatch of the CTR III law by June 2015 for debate in the Swiss Parliament. Due to the Swiss political process, it can be expected that the new reform measures will not come into effect before 2018 or 2020.

PwC comments

The parameters set out by the Swiss Federal Council are certainly a step in the right direction towards regaining certainty for businesses in terms of their likely future tax situation in Switzerland. They will also help to maintain Switzerland’s position as an attractive business location and demonstrate that Switzerland is keen to comply with the new international taxation standards. However, for the future prosperity of Switzerland as business location, we are of the opinion that NID should once again be made part of the CTR III law. It seems that a number of cantons have not (yet) recognised the fundamental importance of this measure for Switzerland. It will therefore be important to convince political stakeholders still further (i.e. representatives of the Swiss Parliament) that the NID measure should be re-introduced.

For any questions, please contact the following Corporate Tax III Champions at PwC Switzerland:

Armin Marti
Leader Corporate Tax Switzerland
Tel: +41 58 792 43 43

Andreas Staubli
Leader Tax & Legal Services Switzerland
Tel: +41 58 792 44 72