Calculation of the participation deduction for too-big-to-fail instruments
Silvia Hunziker
On 20 September 2018, the National Council discussed the dispatch on the Federal Act of 14 February 2018 on the calculation of the participation deduction for too-big-to-fail instruments and approved the Federal Council's draft.
The too-big-to-fail regime (TBTF regime) may make it necessary for banks to issue so-called TBTF instruments to strengthen their capital base or to create additional loss-absorbing funds. Systemically important banks must issue such funds from 2020 at the latest via their group parent company, which will then regularly pass on the resulting funds within the group. Under current law, this process potentially results in a higher income tax burden on investment income for the group parent. This makes it more difficult to build up equity capital. This is contrary to the objectives of the TBTF legislation. The template therefore corrects the calculation of the investment deduction for group parent companies of systemically important banks and thus the potential higher tax burden.
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