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

 

Markt für IT-Outsourcing bleibt auf Wachstumskurs

Die Digitalisierung ist für IT-Dienstleister Chance und Herausforderung zugleich. Cloud Computing, Mobility oder Big Data sind für die IT-Dienstleister zukunftsträchtige Wachstumsfelder – in keine anderen Bereiche investieren sie mehr. Die befragten Anbieter sehen einen weiter wachsenden IT-Outsourcing-Markt und wollen deshalb ihr Personal aufstocken. Die PwC-Studie «IT-Sourcing – die Perspektive der Anbieter» zeigt aktuelle Herausforderungen auf und legt dar, wie sich IT-Dienstleister in Zukunft positionieren.

Sind Sie an einem Exemplar der aktuellen PwC-Studie «IT-Sourcing – die Perspektive der Anbieter» interessiert? Gerne können Sie ein Exemplar hier bestellen.

Tax Technical Course 2015

PwC_PC_France_Paris_MB_080

We are pleased to announce the launch of our Tax Technical course for Tax and Finance professionals.

Switzerland has a unique tax system involving tax authorities at both cantonal and federal levels. As such, it can be difficult to compare your former experiences in other jurisdictions with the interactions you have with the various counterparts in the Swiss tax system.

Our ‘Tax Technical course’ comprises six modules that offer you the opportunity to learn more about Swiss taxation in general and how to deal with the Swiss tax authorities.

You may participate in as many modules as you wish. Swiss certified tax experts, mainly partners and directors, from our offices in Geneva and Lausanne will moderate all of the modules in English.

Each course will be followed by an apéro, giving us even more time to discuss your specific concerns/questions and share experiences.

Whether you are a tax director, tax manager, accountant or financial director, our Tax Technical course aims at giving you an increased awareness of tax opportunities and risks impacting your business.

We are very much looking forward to meeting you for what promises to be a series of insightful and interactive sessions.

Dates & modules:
Each module will take place from 1.30 to 5 pm and will be followed by an apéro

  • Module 1: International / Intercantonal tax allocation,
    Thursday, 28 May 2015
  • Module 2: Corporate restructuring,
    Wednesday, 17 June 2015
  • Module 3: Special tax regimes / CTR III,
    Thursday, 3 September 2015
  • Module 4: Withholding tax / Stamp duty,
    Thursday, 24 September 2015
  • Module 5: Swiss VAT,
    Thursday, 8 October 2015
  • Module 6: Tax administration / Tax return / Relation with tax authorities / Tax litigation/ Procedure
    Tuesday, 27 October 2015

Full programme available here

Venue:
PwC Geneva
50, Avenue Giuseppe-Motta, 1202 Geneva

Participation fee:
CHF 500 (incl. VAT) per module or CHF 2500 (incl. VAT) for the 6 modules

Register now for the module(s) of your choice!

Online registration

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

Introduction

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
armin.marti@ch.pwc.com

Andreas Staubli
Leader Tax & Legal Services Switzerland
Tel: +41 58 792 44 72
andreas.staubli@ch.pwc.com

Swiss Tax Authorities Confirm Modified Interpretation of Principal Company Taxation

In brief

Swiss principal companies have long benefited from the rules of Swiss Federal Tax Administration (SFTA) Circular 8 (2001). On 6 March 2015, the SFTA confirmed in an official letter to the cantonal tax authorities (see enclosure) that it has adopted new interpretations of circular 8 that vary from those the SFTA issued in January 2014. Circular 8 remains applicable for existing and new principal companies, with the following modified interpretations effective as from financial year 2016 for existing and immediate effect for new principal companies.

  • Substance: Principal companies applying Circular 8 must prove sufficient substance in Switzerland. Also when a company meets the overall principal company qualification outsourcing of core principal functions now needs to be reviewed as it may result in an adjustment of the principal tax allocation.
  • Exclusivity test for limited-risk distributors (LRDs) or commissionaires: LRDs and commissionaires must perform limited-risk distribution ‘exclusively’ for Swiss or other group principals. Exclusivity means that at least 90% of the net profit of the distribution company is derived from LRD activities. There will be an available grace period through the beginning of Corporate Tax Reform III — which is not expected to enter into force until 2018-2020 — for existing distributor companies that do not meet the 90% exclusivity test and cannot be restructured in a timely manner to meet the exclusivity test due to legal and operational constraints.
  • Margin test: The principal tax allocation calculation must be adjusted if gross margin/compensation of the LRD or commissionaire exceeds 3%. Companies that cannot meet the 3% gross margin test can use a ‘fall-back’ test that considers the ‘higher costs’ of distributor companies, which now include a 5% mark-up on the higher costs. If the effective LRD remuneration exceeds the new margin test, a respective adjustment to the principal allocation under circular 8 has to be considered.

In detail

Modified exclusivity test
Only distribution companies that exclusively or almost exclusively act as LRDs or commissionaires qualify for principal allocation. To meet the test, at least 90% of the net profit of the distribution company must originate from the limited-risk distribution activity for the Swiss or other group principal. This requirement must be met by each distribution company on a stand-alone basis. A ‘short-term’ violation of the 90% rule will not be disqualifying. Based on recent confirmations from the SFTA, the test can be performed on the basis of local GAAP financial statements or management accounts (e.g. IFRS or US GAAP). This test applies to all principal companies that have obtained a new ruling since 2014 or that apply for principal company treatment for the first time.

Existing (pre-2014) principal companies whose distributors do not fully meet the 90% test will be granted a grace period to restructure their distribution companies. The SFTA has confirmed that the exclusivity rule will not be enforced with respect to existing companies when:

  • The distribution companies will not meet the 90% test.
  • Restructuring under local commercial law cannot be achieved within a reasonable period (i.e., before Corporate Tax Reform III comes into force in 2018-2020).
  • The burden of proof lies with the principal companies.

Modified margin test
Distribution margin affects the principal allocation level under Circular 8 as follows:
Maximum compensation for distribution companies will be the higher of 3% of gross revenues or the higher costs of the distribution companies plus a mark-up of 5% on those costs. If a distributor company also performs non-distribution activities, separate divisional accounts must be provided. Based on the SFTA letter, qualifying costs for the mark-up will include the distributor’s ‘own’ operating costs as well as taxes of the qualifying distribution companies. Third-party costs will not qualify for the mark-up.

Observation: In practice, some uncertainty remains regarding which costs are seen as ‘own’ costs versus ‘third-party’ costs. The SFTA indicates that the cantonal tax authorities should give some flexibility to simplify the cost basis identification and act in favor of the tax payer for such assessment of the cost base.

If effective compensation of the distributors exceeds total permissible compensation, the excess compensation must reduce the principal allocation on the principal company’s tax return, although the 50% deduction under the principal allocation rules will apply. As previously announced, the margin test will be applied in average taking into account all qualifying distributors.
The modified rule will take effect for tax year 2016. Rulings concluded since 2014 under the 2014 rules can be amended to include the cost plus test but apply immediately.

Example of the modified margin test:

Consolidated LRD Basis

Total Sales 1’000
COGS -700
Gross profit 300
Operating expenses -270
Profit before tax 30
Taxes -10
Profit after tax 20

Margin Test Calculation

Effective gross margin: 300 (30% of 1’000)
Permitted gross margin: 30 (3% of 1’000)
Higher costs: 280 (270 operating expenses + 10 taxes)
Higher costs + 5%: 294 (280 * 1.05; assuming all costs qualify as “own” costs)
Difference: 6 (300 effective gross margin ./. 294 higher costs+5%)

Impact on Principal Allocation

Reduction of principal allocation on principal tax return level:  3 (50% of difference)

Other aspects
The head of the SFTA confirmed in a recent meeting that the outsourcing of support or auxiliary functions to shared service centers and similar facilities will not lead to a reduction of the principal profit allocation. (This point was not included in the new letter.) If core principal functions are outsourced, this will still lead to an adjustment of the profit allocation provided overall principal substance in Switzerland is otherwise sufficient. In the case of potential outsourcing of core principal functions, the taxpayer must present its case to the SFTA for resolution.

The takeaway
Existing Swiss principal companies may need to review their positions with respect to the modified interpretation that will take effect in 2016. The SFTA has indicated there will be some leeway during the transition to the new interpretation. Newly established principal companies must take the new interpretations into account immediately.
Switzerland remains an attractive principal location considering its operational business environment. The upcoming Swiss Corporate Tax Reform III is expected to add new measures to maintain the country’s attractiveness.

Let’s Talk

For a deeper understanding of how these issues might affect your business, please reach out to one of the PwC professionals listed below, or your local Swiss contact:

Urs Landolf
PwC
Birchstrasse 160
Postfach, 8050 Zürich
urs.landolf@ch.pwc.com
+41 58 792 43 60
Armin Marti
PwC
Birchstrasse 160
Postfach, 8050 Zurich
armin.marti@ch.pwc.com
+41 58 792 43 43
Christoph Pauli
PwC
Birchstrasse 160
Postfach, 8050 Zurich
christoph.pauli@ch.pwc.com
+41 58 792 44 24
Swiss Tax Desk New York
Martina Walt
PwC
martina.m.walt@us.pwc.com
+1 646 471 6138