For banks, the tax reform (STAF) may lead to a lower capital tax burden. An analysis should be performed and the template for the tax calculation should be revised.
As you known, the tax reform and AHV financing (STAF) came into force on 1 January 2020. An interesting change, which has not been in the spotlight so far, is the change in the method of determining the calculation basis for capital taxes. This new provision may lead to lower capital taxes for banks.
Prior to the tax reform, the tax-adjusted equity as of the balance sheet date formed the basis for capital taxes. The taxable equity of ordinary taxed companies, such as banks, was taxed at a higher tax rate than that of privileged holding companies.
After the introduction of the tax reform, a deduction can now be made from the taxable equity which is attributable to participation rights, patents and loans to group companies (for example: Canton of Zurich 90%; Canton of Zug 98% deduction). This reduces the capital tax burden.
The reason for this additional deduction is to relieve holding companies, which are now also subject to the ordinary (higher) capital tax rate (due to the abolition of the holding status).
In the case of ordinary taxed banks with relevant equity, this newly introduced instrument may lead to a lower capital tax burden. In particular, this new instrument leads to lower capital taxes for banks that hold significant subsidiaries and/or have relevant receivables from group companies (e.g. amounts due from parent bank).
Due to this beneficial change, banks will have to modify the template and documentation for the calculation of capital tax accruals for the financial year 2020.
The new tax calculation should be implemented before the end of 2020 ,depending on the specific situation of the bank (in particular the ratio of total assets to qualifying participations / group receivables) and the granularity of the tax accrual calculation in the monthly/quarterly/half-yearly financial statements.
Please do not hesitate to contact us if we can assist you with the implementation (for example: determining the qualifying receivables, adjusting the tax calculation Excel, preparing the modified documentation).