Credit Suisse warns of higher tax rate under new U.S. rules

[February 06, 2019]  By John Revill

ZURICH (Reuters) - Credit Suisse expects a higher tax rate for 2018 than previously forecast, it said on Wednesday, citing U.S. tax changes aimed at preventing companies from shifting profits abroad.

A worker repairs the logo of Swiss bank Credit Suisse at a branch in Zurich, Switzerland November 1, 2018. REUTERS/Arnd Wiegmann

Switzerland's second biggest lender said it expects an effective tax rate of roughly 40 percent on 2018 results, up from the 36.8 percent rate for the first nine months and higher than its previous full-year guidance of 37 percent.

The bank said the estimate included an "adverse impact" of about 2 percent, based on its assessment of new U.S. regulations.

The Base Erosion Anti-Abuse Tax (BEAT), introduced by the U.S. Treasury Department in December, aims to prevent companies from reducing earnings of their U.S. operations by loading their businesses with costs and deductions, and then using intercompany transfers to shift profit to lower-tax locations abroad.

The rule applies to corporate taxpayers with gross receipts of more than $500 million that make deductible payments to foreign entities. While the BEAT rules are still subject to final clarification, Credit Suisse said "it is more likely than not that the group will be subject to this tax for 2018".

The bank estimates the BEAT regulations would raise its tax burden by about 2 percent next year, to an estimated 30 percent.

Andreas Venditti, an analyst at Bank Vontobel in Zurich, reduced his earnings per share and net profit forecasts as a result.

He cut his 2018 net profit forecast to 1.9 billion francs from 2 billion francs, and his 2019 forecast to 3.3 billion francs from 3.4 billion francs.

"The volatility in tax rate guide is surprising, however it is clear that taxes are a highly complex topic, probably one of the most complex for any company's finance department," he said.

Credit Suisse shares were down 0.6 percent in early trading in Zurich.

The bank, due to report full-year results on Feb. 14, said it awaited final publication of the rules before it could say for certain if it was liable for the tax in 2018 and 2019, as well as the size of the liability.

(Reporting by John Revill)

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