Participation Tax Rues

The corporate tax systems of most European countries contain rules that provide some form of tax relief on income from participations. Under these rules, income, gains or losses from participations are often fully or partly disregarded. Switzerland also recognises participation relief in corporate taxation, yet its rules stand in sharp contrast to the ones commonly encountered, as they treat participations a priori as ordinary taxable assets. This provides both opportunities and pitfalls which taxpayers should be aware of.

The Swiss participation relief

Swiss tax law treats income or gains earned by a corporation from its participations as ordinary taxable business income, while losses from participations are fully deductible. Unlike other tax systems, Swiss tax law does not allow for an adjustment of taxable income for such items. Instead, the Swiss participation relief provides a rebate of the tax payable. The rebate is calculated by reference to the ratio