The Swiss Federal Tax Administration has published information on the legislative and ordinance changes for the upcoming 3 years, among other things, the proposal on the taxation of discretionary trusts.
The introduction of the trust as a new part in the Code of Obligations, the consultation paper provides for adjustments to the tax treatment: Irrevocable discretionary trusts without fixed interest of the beneficiaries shall be taxed like foundations. The fiduciary industry agrees that the proposal to tax irrevocable, discretionary trusts like foundations is not only wrong, but probably also unconstitutional. In particular the following two positions are conceivable:
One position is that the taxation part of the project should be removed from the project completely and the existing tax rules, i.e. Circular 30 of the Swiss Tax Conference, Circular 20 of the SFTA and the cantonal practices shall remain unchanged to the new Swiss trust. .
The other position is that it seems unlikely the parliamentary body would accept a new material trust law without codifying the tax aspects. The fiduciary industry should therefore propose an alternative codification at the level of the tax law. Such alternative proposal would be based on the rules of Circular 30 of the STC, but possibly with certain changes in order to address the criticisms expressed in the report: e.g. the treatment of foreign-settled trusts must have to be aligned with the one of Swiss-settled trusts.