New regulation for profit tax for legal entities pursuing “ideational purposes”

The new law enters into force on 1 January 2018 and will apply even if cantonal tax laws contains contradictory provisions.

“Ideational purpose” provides an exemption from profit tax for legal entities up to CHF 20,000

Legal entities who pursue “ideational purposes” are exempt from profit tax – provided that the profit does not exceed CHF 20,000 and is directly and irrevocably tied to these purposes.

For profits above the exemption limit, tax liability exists irrespective of whether the legal entity fulfills this criterion or not. From 1 January, 2018, this law will come into force, regardless of whether cantonal tax laws contain contradictory provisions.

The federal law on the taxation of profits of legal entities pursuing ideational purposes can be traced back to Motion 09.3343 “Tax exemption for clubs and associations” proposed by Council of States member Alex Kuprecht. This required that clubs and associations be tax exempted in whole or up to a certain amount, provided that they use their income and assets exclusively for ideational purposes. In particular, the intention was to provide tax relief for organisations dedicated to youth support and development.

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