The foreign tax credit in Switzerland

Switzerland has been undergoing a total reform of its domestic corporate tax system with a view to harmonizing its federal, cantonal and communal tax laws. The Direct Tax Law entered into force on 1 January 1995, and the Tax Harmonization Law, introduced on 1 January 1993, established the foundations of a new tax system upon which the tax laws of all the cantons had to be based by 1 January 2001. These reforms have triggered a complete modification of the method for calculating the amount of foreign tax credit available to Swiss residents. This article considers these developments and explains the new tax regulations which allow Swiss residents a tax credit for non-recoverable foreign taxes.