Tax reform in Canton Ticino – What will change?

On 9th of June 2024 the people of Ticino approved the new tax reform. The main change aims to alleviate tax burdens on high incomes, enhancing Ticino’s attractiveness from a tax perspective. The reform encompasses a reduction in income tax rates, along with adjustments to inheritance and gift taxes, as well as a decrease in the tax rates on capital withdrawals from pensions.

The recent tax reform in the Canton Ticino, approved with 57% of the vote, offers a range of benefits to individuals and businesses in the region. The reform will come into force retroactively from 01.01.2024.

The most important changes can be summarised as follows:

• Reduction of the maximum income tax rate from 15.1% to 12% starting gradually from tax year 2024 over the next six years, thereby easing the tax burden on high earners.

• Reduction in cantonal taxation of lump-sum benefits from retirement withdrawal with a maximum rate of 3%. This measure is intended to increase the attractiveness of Ticino for people approaching retirement age.

• Reduction in the maximum inheritance and gift tax rate for the following categories of taxpayers:
  • Third parties: from 41% to 35%
  •  Life partners, children of life partners and foster children: from 41% to 15.5%

• Reduction of 50% in gift and inheritance tax on the transfer of business assets located in Ticino on a sole proprietorship (Einzelunternehmen), or a partnership (Personengesellschaft) or the majority of shares in a corporation to a natural person who holds a managerial position, subject to a lock-up period of 5 years. This aims to facilitate business transitions and continuation, particularly for SMEs, of which there are many in Ticino.

• Increase in the lump-sum deduction for professional expenses to CHF 3,000 (previously CHF 2,500), along with linear reduction in all income tax rates for natural persons by 1.667%.

The tax reform in Ticino represents a significant opportunity for both companies and individuals. The reduction in income tax rates, adjustments to inheritance and gift tax rates, and the facilitation of business transitions present opportunities for greater tax efficiency, succession planning and overall tax stability.

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Authors

• Michelle Hug-Fahrni -  Partner, Global Employer Services
• Céline Wehrle - Director, Global Employer Services
• Nicolas Sandrinelli - Assistant Manager, Global Employer Services