On 4 May 2018, the federal tax authorities have published a new circular regarding the tax treatment of participation instruments for employers (circular No 37A). The circular enters into force with immediate effect.
What is it about?
Whereas the circular No 37 mainly provides guidance on the definition and individual income tax treatment of participation instruments in national and international cases, the new circular No 37A focuses on the corporate tax impact for employers resulting from participation instruments, i.e. tax deductibility of corresponding expense.
What does this mean for employers?
The cost in connection with employee participation programs are generally tax deductible for corporate tax purposes as long as this is adequately reflected in the books. The new circular provides various examples in this respect. However, the devil lies in the detail.
We recommend you to assess the potential impact of the new guidance on your plans and processes to avoid / mitigate any tax exposure. If you have any questions regarding the circular contact Remo Schmid.