Tax reform to enter into force on January 1, 2020

The cantonal government has decided to bring the sixth tax law revision into force on January 1, 2020. The core of this revision is the implementation of the Federal Act on Tax Reform and AHV Financing (TRAF) into cantonal tax law. The corresponding provisions at federal level will enter into force at the same time.
 
On May 19, 2019, the Swiss electorate voted in favor of the Federal Act on Tax Reform and AHV Financing in a referendum. In the Canton of Zug, the referendum deadline against the amendment of the cantonal tax act of June 27, 2019 to implement the federal tax bill expired unused on September 3, 2019.
 
Entry into force as per January 1, 2020
The Federal Act on Tax Reform and AHV Financing will enter into full force on January 1, 2020, as decided by the federal Council. If a canton fails to implement the mandatory provisions of the TRAF by this date, federal law will apply directly. This would lead to an extremely unsatisfactory situation for both companies and the Canton of Zug: In this case, the introduction of the standard tax rate would no longer be possible in due time. For the companies concerned, this would result in a fiscal shock that would hardly be cushioned, as their tax burden would, in extreme cases, rise by more than 50 percent. For this reason, the government council has decided to put the changes in cantonal law into effect on January 1, 2020.
 
Early implementation
Aware of the need to implement the TRAF provisions, the cantonal government and cantonal council initiated the sixth cantonal tax law revision at an early stage. The cantonal government had already discussed the revision of the law at its first reading during the referendum on May 19, 2019. If the Swiss electorate had rejected the TRAF, the cantonal procedure would also have had to be discontinued. «We simply wanted to be on the safe side so that we could have complied with January 1, 2020 even in the event of a cantonal referendum», explains Minister of the Department of Finance Heinz Tännler.
 
Key figures of cantonal implementation
The Federal Act on Tax Reform and AHV Financing brings the Swiss tax system into line with international standards. This reduces the risk of discrimination in world trade. In future, the cantons will receive additional funds from the confederation from direct federal tax in order to adapt their tax system and compensate for tax shortfalls. For the Canton of Zug, the TRAF provisions will be implemented with a revenue-neutral tax restructuring by adapting the cantonal tax act. Minister of the Department of Finance Heinz Tännler explains this as follows: «While the previously privileged tax status for holding, domicile and mixed companies will be abolished, natural persons will not be affected by the tax restructuring.