Easily abused substance: How much substance does an entity need in order to be taxed in a particular country?

Setting up an entity through which an active business is conducted, or an interest other entities is held, is well understood and common. However, the world keeps on changing. As countries scramble to protect and enlarge their tax revenue base they are taking a fresh look at taxing entities, especially foreign ones. Much turns on the question of where an entity has its true substance.

The tax residence of an entity does not necessarily match the place where it is formally registered or incorporated. Some countries may claim that the entity is tax resident in their country if it is centrally managed and controlled from there. At issue is the highest level of decision making of the entity and not, for example, mere operational control. Factors to be considered include identifying the effective and economic centre of the entity’s existence and the place where the essential decisions of the entity are taken.

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Contact us

Andri Manatschal
+41 58 792 43 18

Albrecht Herholdt
Senior Manager
+41 58 792 25 76

EU – Register of beneficial owners

Under the 4th anti-money laundering directive of the European Union, all European countries are obliged to introduce legislation that will create a register of the ultimate beneficial owners (UBOs) of structures. Who qualifies as a UBO? What information will be collected? Who will have access to the data?

The 4th Anti-Money Laundering directive entered into force on 26 June 2017. Each member state should by now have transposed the directive into their national law. What follows is a discussion of the provisions of the directive itself at EU level.

To read more about the discussion, please click below.

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Marcel Widrig
Partner | Leader Private Wealth Services Switzerland
+41 58 792 44 50

Albrecht Herholdt
Senior Manager | Tax & Legal Services: International Private Wealth & Entrepreneurs
+41 79 278 72 38

United States: release of framework for tax reform

3 October 2017

On 27 September 2017, the Trump Administration and Congressional Republican leaders released a nine-page “Unified Framework for Fixing Our Broken Tax Code” (the “Framework”). The Framework statement is the latest product of tax reform discussions and calls for a 20% corporate tax rate, a new 25% rate for certain pass-through business income, and international reforms that include a territorial tax system and a one-time mandatory repatriation tax.

The Framework calls for the House and Senate tax committees to provide specific details of tax reform legislation and resolve many open issues, including effective dates for the proposals. Administration officials and Republican Congressional leaders say their goal is to enact tax reform in 2017.

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Stefan Schmid
Corporate Tax Switzerland
Tel. +41 58 792 4482
Send E-Mail

Monica Cohen-Dumani
Corporate Tax Switzerland
Tel. +41 58 792 9718
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Michael Ruckstuhl
Corporate Tax Switzerland
Tel. +41 58 792 1494
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Swiss Tax Proposal 17 – Launch of the PwC Step-up-Calculator

Switzerland is currently preparing the so-called Tax Proposal 17 (TP 17). As a consequence, the existing cantonal tax privileges for holding, domiciliary and mixed companies will be abolished, most likely as per 1 January 2020. In order to smoothen the transition for these so-called status companies, the reform foresees a separate taxation rate for existing hidden reserves. In addition, based on the current legislation, various cantons offer the possibility of a step-up of hidden reserves for tax purposes when giving up the privileged taxation status before the effective date of TP 17.

In order to provide affected companies a quick and easy estimation of the impact of these transitional rules, we have built the PwC Step-up Calculator. This web-based tool offers free estimations of the indicative fair market value of the company, its step-up potential and the magnitude of the potential tax benefit resulting from claiming the step-up potential with the tax authorities. The app also offers the possibility of ordering a paid data sanity check by PwC’s valuation experts. The deliverable will be in the form of a PwC document containing the validated high-level fair market value and the estimated step-up potential. This document may then be used as a basis for discussions with the tax authorities.

You can find the PwC Step-up-Calculator at the following link:



If you have any questions or would like to have a personal discussion on the impact of Tax Proposal 17, please do not hesitate to contact

Armin Marti
Leader Corporate Tax Schweiz
Tel. +41 58 792 4343
E-Mail: armin.marti@ch.pwc.com

For questions relating to company valuations, please feel free to contact

Dr. Marc Schmidli
Leader Energy
Tel. +41 58 792 1564
E-Mail: marc.schmidli@ch.pwc.com

EUDTG Newsletter July – August 2017

EU direct tax law is a fast developing area. This presents taxpayers, in particular groups and multinational corporations that have an EU or European Economic Area (EEA) presence, with various challenges.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • Germany CJEU referral of domestic anti-treaty shopping rule as potential violation of the fundamental freedoms/ Parent-Subsidiary Directive

National Developments

  • Italy Tax Court of Appeal decision on EU law compatibility of withholding tax levied on dividends distributed to US pension fund
  • Netherlands Proposal Bill for new law on State aid recovery
  • United Kingdom Publication of EU Withdrawal Bill

EU Developments

  • EU Updated EU BEPS Roadmap for coordinated EU action under the Estonian EU Presidency
  • EU European Parliament adopts legislative resolution on public CBCR
  • EU European Parliament votes for EU Directive on double taxation dispute resolution mechanism in the European Union

Fiscal State aid

  • Cyprus Tax authorities issue interpretative circular for financing companies
  • EU European Commission finds Poland’s retail tax in breach of EU State aid rules
  • EU European Commission requires Belgium and France to abolish tax exemptions for ports


Read the full newsletter


This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG).

Further information about our service offerings in EU taxes: www.pwc.com/eudtg


Armin Marti
Partner Tax & Legal Services, Leader Corporate Tax Services
+41 58 792 43 43

Anna-Maria Widrig Giallouraki
Senior Tax Manager
+41 58 792 42 87

Calibrate your tax compass

Tax Forum 2017

The right navigation instruments can help you reach your destination quickly and safely. Our tax pilots at the Tax Forum 2017 will guide you clear of the shallows and help you steer a course for your business targets.

Below you’ll find details of all the speakers, dates and venues. In Geneva and Zurich we’ll also be venturing into international waters and plumbing the depths of the US tax reform and Brexit.

Tap into the insights and experience of our experts and keep moving ahead. We look forward to seeing you at the Tax Forum 2017!

Here you’ll find various dates and venues to choose from.

Worldwide Tax Summaries – Corporate Taxes 2017/2018

We are delighted to inform you that the 2017/2018 edition of PwC’s Worldwide Tax Summaries on Corporate Taxes is now available online.

The new eBook (ePub and iBook formats) can be found at www.pwc.com/taxsummaries/ebook for use on most digital devices (e.g. desktops, laptops, tablets, smartphones). To view an ePub on your device, please ensure you have an app installed that can read the ePub format. Compatible apps should be available in your device’s app market or app store.

It is further worth noting that the fully mobile Worldwide Tax Summaries website, which is kept current throughout the year and covers corporate and individual taxes in over 150 countries, including quick charts, can be found at www.pwc.com/taxsummaries.

Are you interested in other information and news?

PwC has a lot to share with you, in the form of tax alerts, breaking tax news, newsletters, etc.

However, to make sure you only get what you want respectively your personalised news, we ask you to make your choices on the following PwC links (German, English, or French).

DE – http://newsletter.pwc.ch/inxmail9/pwc_subscription_de.jsp?lang=de

EN – http://newsletter.pwc.ch/inxmail9/pwc_subscription_en.jsp?lang=en

FR – http://newsletter.pwc.ch/inxmail9/pwc_subscription_fr.jsp?lang=fr

Swiss Federal Council released Tax Proposal 17 for formal consultation

On 6 September the Federal Council initiated the consultation procedure with respect to the Tax Proposal 17 (formerly “Corporate tax reform III”; CTR III). The overall objectives of the reform remain unchanged, i.e. improve the attractiveness of Switzerland as a business location, maintain and create jobs and adjust the corporate tax law to the new international standards. In addition, in order to take into account learning points from the negative vote on CTR III in February 2017, the Tax Proposal 17 puts more emphasis on the financial impact of the tax reform on the Federal as well as on municipalities’ and cities’ budgets.

The consultation period will last until 6 December 2017. It is foreseen, that the draft bill will make its way back to the Federal Council, for further submission to the Parliament, in spring 2018. The earliest anticipated entry into force would be 2020.

Apart from the draft bill, the package also includes an ordinance on the reduced taxation of profits from patents and similar rights (clarification of the patent box). The different proposals are outlined in our current newsletter.

If you have questions, please contact your usual PwC contact person or one of PwC Switzerland´s experts named below.


Dieter Wirth
Leader TLS Schweiz
Tel. +41 58 792 44 88
Send E-mail
Armin Marti
Leader CT Schweiz
Tel. +41 58 792 43 43
Send E-mail
Benjamin Koch
Leader TP and VCT
+41 58 792 43 34
Send E-mail
Daniel Gremaud
Tax & Legal
+41 58 792 81 23
Send E-mail
Claude-Alain Barke
Tax & Legal
+41 58 792 83 17
Send E-mail
Remo Küttel
Tax & Legal
+41 58 792 68 69
Send E-mail
Laurenz Schneider
Tax & Legal
+41 58 792 59 38
Send E-mail

“Royalty Restrictions“ in Germany

11 July 2017

Germany has recently introduced new rules that will restrict the tax deductibility of related-party cross-border royalty payments if these payments are benefiting from a low taxation triggered by a harmful preferential tax regime in the country of the recipient.

Based on these new rules, such royalty expenses incurred after 31 December 2017 will no longer be fully deductible in Germany if the relevant income is subject to an effective tax rate of less than 25%:

In detail

For example, if the royalty income is subject to a preferential 10% effective tax rate, 60% of the royalty payments would not be deductible at the German taxpayer level.

However, if a recipient of cross-border royalty payments is subject to the regular tax rate (i.e. no preferential tax regime applies), the royalty restriction rule is not applicable, even if the effective tax rate is less than 25%.

Furthermore, patent box regimes which comply with the OECD “nexus” approach (i.e. under foreign law the preferential tax rate is only granted following an OECD-compliant “nexus” approach) are exempt from the new rule. A patent box of this kind is likely to be introduced in Switzerland in the context of tax package 17 (former corporate tax reform III).

It should however be noted that tax package 17 and therefore an
OECD-compliant Swiss patent box will probably not be introduced before 2020. Consequently, German royalty payments incurred between 1 January 2018 and the introduction of such a patent box in Switzerland could be subject to the new German royalty restriction rule if such royalties benefit from a Swiss preferential tax regime. The following regimes in Switzerland should be investigated in particular to establish whether or not they qualify as harmful preferential tax regimes:

  • Nidwalden IP Box
  • Mixed companies
  • Holding companies
  • Principal companies

An investigation into the impact of the new German limitation rules is recommended in order to determine their impact and to decide whether restructuring should be conducted before 1 January 2018.

In summary, there is still some uncertainty about how the new rules will be interpreted and applied. However, for now it can be assumed that all Swiss preferential regimes may potentially cause issues under the German royalty restriction rule.

There are, however, certain planning ideas which can help mitigate and/or reduce such issues. These solutions may depend on the very specific circumstances of your group and we advise you to have them analysed by your PwC tax consultant on a case-by-case basis.

For a more detailed discussion of how this might affect your business, please contact:

Armin Marti
Partner, Leader Corporate Tax
Tel. +41 58 792 43 43

Stefan Schmid
Partner, Tax & Legal
+41 58 792 44 82

Roman Brunner
Partner, Tax & Legal
+41 58 792 72 66

Urs Brügger
Partner, Tax & Legal
+41 58 792 45 10

Reto Inauen
Senior Manager, Tax & Legal
+41 58 792 42 16

Cooperation between PwC and Noveras Tax Reporting for international Banking Clients

PwC and Noveras Services AG have agreed to cooperate in providing offshore tax reports for banks located in Switzerland and in foreign countries. This cooperation results in the following benefits:

Benefits for Banks:

  • Able to offer truly country-specific, high-quality tax reports to clients
  • No need to build up and maintain tax reporting infrastructure
  • No need to follow tax laws around the world
  • Tax reporting provided even for small numbers of clients
  • Flexible, cost-efficient cooperation

Benefits for Clients:

  • Client receives a high-quality tax report for their offshore account
  • Reports deliver all of the necessary information for client’s tax return in their country
  • Overall lower costs for the client due to saving the expense of local tax support

Statement by the Leaders

  • This unique cooperation ensures several high-quality services (such as highly skilled tax reporting products).
  • The synergy between PwC as leading expert advisor in tax-related topics and a practice-oriented boutique with profound knowledge of wealth management / cross-border banking, IT and international tax law creates a unique market solution.

Find out more


Dieter Wirth
+41 58 792 4488

Michael Taschner
Senior Manager
+41 58 792 1087