Switzerland proposed tax changes that it hopes will resolve a dispute with the European Union over preferential rates offered to multinationals while retaining the country’s appeal as business location.

Switzerland will follow 11 EU nations in introducing royalty boxes, which allow lower taxation on revenue from intangible assets such as patents, Finance Minister Eveline Widmer-Schlumpf told reporters in Bern today. That measure and proposals for an interest-adjusted profit tax will ease pressure from the EU, said Armin Marti, leader of corporate tax at PricewaterhouseCoopers in Zurich.

“The proposal includes everything to keep Switzerland attractive as a location for national and international businesses,” Marti said in a phone interview.

Switzerland has been at odds with the EU over its auxiliary tax regime, which allows companies to pay lower rates on overseas earnings. That helped lure hundreds of global corporations from Procter & Gamble Co. to Vitol Group. The new tax proposals must be approved by both houses of parliament.

What’s needed is “a tax system that’s accepted,” Widmer-Schlumpf said. “Switzerland as a small but strong country has a keen interest in a level playing field.”

Switzerland’s move to introduce a special exclusion for international property income follows the U.K.’s decision last year to cut the tax rate on profit attributed to patents and intellectual property to 10 percent — less than half the country’s corporate tax rate of 21 percent.

 

Source: BloombergBusinessweek