Tax on corporate transactions in Switzerland: overview

A Q&A guide to tax on corporate transactions in Switzerland.

The Q&A gives a high level overview of tax in Switzerland and looks at key practical issues including, for example: the main taxes, reliefs and structures used in share and asset sales, dividends, mergers, joint ventures, reorganisations, share buybacks, private equity deals and restructuring and insolvency.

To compare answers across multiple jurisdictions, visit the Tax on Corporate Transactions: Country Q&A tool.

The Q&A is part of the global guide to tax on transactions. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxontransactions-guide.

Contents

Tax authorities

1. What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

Switzerland is a federal union of 26 states called "cantons", which are divided into municipalities (also called communities). The federal power is referred to as the Confederation. There are authorities at each level of government responsible for the enforcement of taxes.

The Federal Tax Administration (FTA) is responsible for the enforcement of the following taxes:

  • Value added tax (VAT).

  • Withholding tax.

  • Securities transfer stamp tax.

  • Securities issuance stamp tax.

The various cantonal and communal tax authorities are responsible for the enforcement of, among others, corporate income taxes (levied at a federal, cantonal and communal level), and corporate capital taxes (levied at a cantonal and communal level only), in accordance with their territorial jurisdiction. Those taxes are levied on:

  • Companies with their seat or effective place of management within their respective territory.

  • Permanent establishments of:

    • foreign companies within their respective territory; or

    • Swiss companies that are domiciled or effectively managed in another canton.

  • Companies holding real estate in the canton.

In addition, depending on the canton, the cantonal and communal tax authorities are also responsible for enforcing real estate capital gains taxes and/or real estate transfer taxes.

 

Pre-completion clearances and guidance

2. Is it possible to apply for tax clearances or obtain guidance from the tax authorities before completing a corporate transaction?

Circumstances for obtaining clearance

Advanced tax rulings are common in Switzerland. To be binding, all the following conditions must be met:

  • The ruling refers to a concrete matter related to the applicants.

  • The facts described in the ruling were carried out as described.

  • The approval was given without any reservation.

  • The ruling was addressed to the competent authority or the applicant had sufficient reasons to consider the authority as competent.

  • If the ruling was not accurate, the applicant could not have readily detected the inaccuracy of the ruling.

  • The applicant, in trusting the ruling, has made arrangements that he cannot revoke without disadvantages.

  • The legal situation at the time of the realisation of the transaction is the same as at the date of the ruling.

Mandatory or optional clearance

There is no mandatory clearance in Switzerland. However, it is strongly recommended to obtain an advanced ruling in complex transactions.

Procedure for obtaining clearance

There is no fixed procedure for obtaining clearance. Generally, a letter must be addressed to the competent tax authority.

 

Disclosure of corporate transactions

3. Is it necessary to disclose the existence of any corporate transactions to the tax authorities?

No disclosure to the tax authorities is required.

 

Main taxes on corporate transactions

Transfer taxes and notaries' fees

4. What are the main transfer taxes and/or notaries' fees potentially payable on corporate transactions?

Securities issuance stamp tax

Key characteristics. The Federal Tax Administration (FTA) levies stamp tax on shareholders' contributions to a Swiss company, regardless of whether they receive shares in exchange for their contribution. Certain transactions are exempt from issuance stamp tax (for example, certain restructurings).

Triggering event. Securities issuance stamp tax is triggered when a shareholder's total contribution exceeds CHF1 million.

Liable party/parties. The tax is payable by the company to which the contribution is made.

Applicable rate(s). The rate is 1% of the total amount contributed over the exempted amount of CHF1 million.

Securities transfer stamp tax

Key characteristics. The FTA levies the transfer stamp tax when one of the parties or one of the intermediaries involved in a transfer of taxable securities is a securities dealer according to the Swiss Stamp Tax Act. Taxable securities are securities issued by a Swiss person, or their equivalent issued by a foreign person. Certain transactions are exempt (for example, certain restructurings).

Securities dealers are, among others, banks and other financial institutions, as well as Swiss companies that hold, according to their latest balance sheet, taxable securities for a combined book value of more than CHF10 million.

Triggering event. Transfer of ownership over taxable securities for consideration, if a securities dealer is involved in the transaction.

Liable party/parties. The tax must be paid by the securities dealer.

Applicable rate(s). The applicable rates are:

  • 0.15% for Swiss securities.

  • 0.3% for foreign securities.

Real estate gains taxes

Key characteristics. Certain cantons and communities levy a separate real estate gains tax. In such a case, real estate gains are exempt from cantonal corporate income taxes.

Triggering event. Change of ownership over real estate property or sale of the majority of the shares in a real estate company.

Liable party/parties. The owner of the real estate is liable to pay the tax.

Applicable rate(s). The applicable rates depend on the canton/community where the real estate is located. The rate is mandatorily digressive according to the duration of ownership.

Real estate transfer taxes

Key characteristics. Certain cantons and communities levy a real estate transfer tax.

Triggering event. Change of ownership over real estate or sale of the majority of the shares in a real estate company.

Liable party/parties. This depends on the canton/community. In a majority of cases, the buyer is liable.

Applicable rate(s). The applicable rates depend on the canton/community. The current highest rate is 3.3% of the fair market value of the transferred property.

Notaries' fees

Key characteristics. Certain transactions require a notarial deed for which fees are payable.

Triggering event. Triggering events include the incorporation of a Swiss corporation or Swiss limited liability company, and the transfer of real estate.

Liable party/parties. This depends on the deed required.

Applicable rate(s). The applicable rates are determined by the canton where the deed is executed.

Land register charges

Key characteristics. Land register charges are due on selling, acquiring or transferring real estate located in Switzerland.

Triggering event. The triggering event is the sale, acquisition or transfer of real estate located in Switzerland.

Liable party/parties. This depends on the required modification of the land register.

Applicable rate(s). The applicable rates are determined by the canton where real estate is located.

 

Corporate and capital gains taxes

5. What are the main corporate and/or capital gains taxes potentially payable on corporate transactions?

Corporate income taxes

Key characteristics. Corporate income taxes are levied at the federal, cantonal and communal levels. The taxable profit is determined according to the Swiss generally accepted accounting principles (GAAP). Apart from the real estate gain taxes (see Question 4, Real estate gains taxes), there is no special treatment of corporate income (all income approach). However, tax liability does not extend to the profits of permanent establishments and real estate located abroad. Swiss companies can carry forward losses for a seven-year period and set them off against future profits. It is not possible to carry back losses.

Triggering event. Corporate income taxes are levied on the profits of companies that have their registered office or place of effective management in Switzerland. The tax duty is limited to profits taxable in Switzerland for foreign companies that have a permanent establishment or real estate in Switzerland.

Liable party/parties. The company is liable to pay the tax.

Applicable rate(s). The federal tax rate is of 8.5% (statutory tax rate), and 7.8% taking into account that taxes are deductible from taxable profits (effective tax rate).

The cantonal and communal tax rates vary according to the canton/community.

The total rate will generally range between 11.2% and 23.2% (effective rate including federal taxes). For companies that benefit from a special status (for example, the holding, domiciliary or mixed company status), the effective tax rate will range between 7.8% and 12.5%.

 

Value added and sales taxes

6. What are the main value added and/or sales taxes potentially payable on corporate transactions?

Value added tax (VAT)

Key characteristics. The following transactions are subject to VAT:

  • Supply of goods or services in Switzerland and Liechtenstein (VAT).

  • Import of goods or services (import and acquisition tax).

Certain transactions are not subject to Swiss VAT, including (among others):

  • Real estate transactions.

  • Transfer of securities, including shares.

  • Financial services.

Generally, VAT does not apply to exports and turnover generated outside of Switzerland or Liechtenstein.

Triggering event. Business entities within the meaning of the VAT Act with a taxable turnover in Switzerland of more than CHF100,000 are subject to Swiss VAT. Entities subject to Swiss VAT are eligible for (full or partial) VAT input deduction. Business entities that do not reach this threshold are free to voluntarily subject themselves to VAT in order to benefit from VAT input deduction.

Legal entities that are under the common control of a single legal entity and with their place of business or a permanent establishment in Switzerland can form a VAT group. The intra-group turnover is not subject to VAT.

The acquisition tax is triggered by the import of goods or services that are not subject to import tax by:

  • Swiss business entities that are not liable to VAT, if their imports amount to at least CHF10,000 per year.

  • Foreign businesses that are not subject to Swiss VAT.

Liable party/parties. The taxpayer is the seller of the good or the provider of the service, and the buyer of goods or services in the case of acquisition tax.

Applicable rate(s). The standard rate is 8% and the reduced rate is 2.5% (3.8% for the hotel industry).

 

Other taxes on corporate transactions

7. Are any other taxes potentially payable on corporate transactions?

Withholding tax

Key characteristics. The Federal Tax Administration (FTA) levies a withholding tax on income derived from movable capital assets (that is, interest and dividend payments, as well as certain insurance payments). The tax must be deducted by the debtor from the amount due to the recipient. In certain circumstances, a refund of the tax withheld can be obtained.

Triggering event. Withholding tax is triggered by income derived from movable capital assets (for example, dividend payments).

Liable party/parties. The debtor of the taxable payment is liable.

Applicable rate(s). The applicable rate is 35%.

 

Taxes applicable to foreign companies

8. In what circumstances will the taxes identified in Questions 4 to 7 be applicable to foreign companies (in other words, what "presence" is required to give rise to tax liability)?

Corporate income taxes

A foreign company will be subject to corporate income taxes on its profits realised in Switzerland if it has a permanent establishment or holds real estate property in Switzerland.

A foreign company will be liable to Swiss corporate income taxes on its profits (except if attributed to a foreign permanent establishment) if its place of effective management is in Switzerland.

See Question 5.

Value added tax (VAT)

Any person (Swiss or foreign) is liable to Swiss VAT regardless of its legal form, if such person both:

  • Operates a business in Switzerland.

  • Is not VAT exempt (for example, its turnover is CHF100,000 or more).

Therefore, a permanent establishment of a foreign corporation can be liable to VAT.

See Question 6.

Securities issuance stamp tax

Only companies that are incorporated in Switzerland are subject to the securities issuance stamp tax (subject to the tax avoidance test) (see Question 4, Securities issuance stamp tax).

Securities transfer stamp tax

Securities transfer tax must be paid if a Swiss securities dealer is involved in a security transaction as a party or as an intermediary (see Question 4, Securities transfer stamp tax). The domicile of the seller and buyer is irrelevant.

Withholding tax

Foreign companies can only be subject to Swiss withholding tax if they are effectively managed from Switzerland (see Question 7).

Real estate transfer taxes

Foreign owners of real estate located in Switzerland are subject to real estate transfer taxes on the transfer of such property (see Question 4, Real estate transfer taxes).

Real estate gains taxes

Foreign owners of real estate located in Switzerland are subject to real estate gains taxes if they transfer such property (see Question 4, Real estate gains taxes).

Notaries' fees

Foreign companies are only subject to notaries' fees if a transaction requires a public deed (see Question 4, Notaries' fees).

Land and register charges

Foreign companies must pay land and register charges if they are selling, acquiring or transferring Swiss real estate (see Question 4, Land and register charges).

 

Dividends

9. Is there a requirement to withhold tax on dividends or other distributions?

Dividends distributed by companies that have their seat or effective place of administration in Switzerland are subject to a 35% withholding tax. Withholding tax must be paid on open and constructive dividends distributions, which include excessive interest payments or any form of financial advantage granted to affiliated parties.

In certain cases, foreign shareholders are entitled to a refund under either:

  • Article 15 of the Savings Tax Agreement with the EU.

  • A double taxation treaty.

The obligation to pay tax can in certain cases be replaced by a notification procedure on prior approval of the Federal Tax Administration (FTA).

From 2011, distributions of capital reserves that were directly contributed by the shareholders are no longer subject to Swiss withholding tax (subject to conditions).

 

Share acquisitions and disposals

Taxes potentially payable

10. What taxes are potentially payable on a share acquisition/share disposal?

Securities transfer stamp tax

The transfer stamp tax must be paid if a Swiss securities dealer (according to the Stamp Tax Act) is a party or an intermediary to a share sale (see Question 4, Securities transfer stamp tax).

Corporate income taxes

Gains realised by a company on a share disposal are included in its financial statements and therefore subject to corporate income taxes. Capital losses are deductible.

Real estate gains taxes

Some cantons and communities levy real estate gains taxes on the transfer of a majority of the shares in a Swiss real estate company (see Question 4, Real estate gains taxes).

Value added tax (VAT)

Sales of shares are exempt from Swiss VAT (see Question 6).

 

Exemptions and reliefs

11. Are any exemptions or reliefs available to the liable party?

Corporate income taxes

Participation relief. Companies holding at least 10% of the share capital of another company or the rights to at least 10% of the profits and reserves of another company, for at least one year, are entitled to a participation relief on the capital gains realised on the sale of such participation.

The corporate income taxes due are first calculated in the usual way, and are then reduced by the ratio of net earnings on participations (that is, gross earnings minus financial and administrative expenses) to the total net income. For example, if the net capital gains amount to 50% of the company's total net income, corporate income taxes will be reduced by 50%.

Restructuring. No corporate income tax is due when shares are transferred in connection with a tax-neutral restructuring. See Questions 21 and 27.

Replacement relief. If participations are sold by a company and the proceeds of sale are reinvested in other participations within a reasonable time (that is, within one to three years), no corporate income taxes will be due on the unrealised gains.

 

Tax advantages/disadvantages for the buyer

12. Please set out the tax advantages and disadvantages of a share acquisition for the buyer.

Advantages

Qualifying capital reserves that were contributed by previous shareholders can be distributed to the buyer free of Swiss withholding tax. Losses carried forward before the acquisition can be used ordinarily.

Disadvantages

As there is no group taxation under Swiss law with respect to corporate income taxes, the buyer will not be able to set off financing costs against profits of the target company. In addition, as the goodwill of the target company is included in the acquisition price, it cannot be used tax-effectively to reduce corporate income taxes.

 

Tax advantages/disadvantages for the seller

13. Please set out the tax advantages and disadvantages of a share disposal for the seller.

Advantages

The seller may benefit from the participation relief and/or the replacement relief (see Question 11) on the proceeds of a share sale and be exempted from corporate income taxes.

Disadvantages

The set-off of losses carried forward in the target company against gains from the sale of the shares is not possible, as each legal entity is treated as an independent entity under Swiss law.

 

Transaction structures to minimise the tax burden

14. What transaction structures (if any) are commonly used to minimise the tax burden?

Capital gains taxes

Because of the participation relief, the taxation of capital gains is limited (see Question 11). In addition, corporate income taxes on capital gains resulting from the sale of shares can be minimised by using holding structures (see Question 35).

 

Asset acquisitions and disposals

Taxes potentially payable

15. What taxes are potentially payable on an asset acquisition/asset disposal?

Corporate income and capital gains taxes

Gains on the sale of assets (capital gains) are subject to income taxes (see Question 5). Depending on the canton and/or the municipality, gains from the sale of real estate can be exempt from the cantonal and/or communal income taxes, but will be subject to cantonal and/or communal real estate gains taxes (see Question 4, Real estate gains taxes).

Value added tax (VAT)

The sale of assets located in Switzerland is subject to VAT at a rate of 8%. In some cases, a notification procedure must be followed or can be chosen voluntarily (see Question 16, Value added tax (VAT)).

Real estate transfer taxes and notaries' fees

The sale of real estate is subject to real estate transfer taxes in most cantons (see Question 4, Real estate transfer taxes) and to notaries' fees, as a public deed is required (see Question 4, Notaries' fees).

 

Exemptions and reliefs

16. Are any exemptions or reliefs available to the liable party?

Corporate income and capital gains taxes

Replacement relief for business assets and real estate. For corporate income tax purposes, the replacement relief allows a company to differ taxation of profits from the sale of fixed assets used in connection with its business, if such profits are reinvested within a reasonable time in the replacement of fixed business assets located in Switzerland. Consequently, the corporate income taxation of unrealised gains can be differed. This also applies to real estate if the legal requirements above are fulfilled.

Restructuring. No corporate income taxes are due on the transfer of assets in the case of a tax-neutral restructuring (see Question 27).

Loss relief

Losses can be set off against capital gains from the sale of assets that do not benefit from the replacement relief.

Amortisation

Assets (including goodwill) can be written down tax-effectively.

Value added tax (VAT)

If both parties to a transaction are liable to VAT, and if such parties are affiliated, or if the VAT payable on the transaction exceeds CHF10,000, the notification procedure is compulsory in the following cases:

  • Tax-neutral restructuring (see Questions 21 and 27).

  • Transfer of all or part of a business under the Swiss Merger Act.

 

Tax advantages/disadvantages for the buyer

17. Please set out the tax advantages and disadvantages of an asset acquisition for the buyer.

Advantages

The buyer of assets can set off future profits resulting from those assets against financing costs. In addition, the acquired assets, including goodwill, can be amortised tax-effectively.

Disadvantages

The buyer cannot use any loss carried forward by the seller company.

 

Tax advantages/disadvantages for the seller

18. Please set out the tax advantages and disadvantages of an asset disposal for the seller.

Advantages

Losses and losses carried forward can be set off against profits and capital gains from the sale of assets.

Disadvantages

The seller has the following disadvantages (except where the replacement relief applies):

  • Capital gains are subject to corporate income taxes.

  • Depending on the canton, the sale of real estate may be subject to real estate gains and/or transfer taxes.

 

Transaction structures to minimise the tax burden

19. What transaction structures (if any) are commonly used to minimise the tax burden?

Demerger or spin-off

By spinning-off assets (that is, forming a viable business entity) into a subsidiary before their sale (as a share deal), the seller can conduct a tax-neutral restructuring under Swiss law. A spin-off is not subject to any blocking period (see Question 27).

 

Legal mergers

Taxes potentially payable

20. What taxes are potentially payable on a legal merger?

If the legal merger fulfils the legal requirements to qualify as a tax-neutral restructuring, there are no potential payable taxes (see Question 21). Otherwise, the following taxes may be due:

 

Exemptions and reliefs

21. Are any exemptions or reliefs available to the liable party?

Restructuring

A merger is a tax-neutral restructuring if the assets and liabilities are transferred at tax book value and are still subject to unlimited taxation in Switzerland. Tax-neutrality applies with regards to the following taxes:

  • Corporate income taxes.

  • Securities transfer and issuance stamp taxes.

  • Withholding tax.

  • Real estate gains and transfer taxes.

  • VAT.

A restructuring can also generally be tax-neutral for shareholders, except where the reserves stemming from accumulated profits are distributed (for example, in the form of cash consideration).

 

Transaction structures to minimise the tax burden

22. What transaction structures (if any) are commonly used to minimise the tax burden?

Restructuring

Mergers are generally structured so as to fulfil the legal requirements that guarantee tax-neutrality (see Question 21).

 

Joint ventures

Taxes potentially payable

23. What taxes are potentially payable on establishing a joint venture company (JVC)?

Corporate income taxes

The transfer of assets to a JVC may be subject to corporate income taxes at the transferor's level (see Question 5).

Securities issuance stamp tax

Contributions from shareholders of CHF1 million or more are subject to a 1% tax (see Question 4, Securities issuance stamp tax).

Securities transfer stamp tax

The transfer of securities may be subject to tax if a party or intermediary involved is a Swiss securities dealer (see Question 4, Securities transfer stamp tax).

Value added tax (VAT)

The transfer of assets such as intellectual property rights may be subject to Swiss VAT, while the transfer of securities is exempt (see Question 6).

Notaries' fees

Notaries' fees are due, as the incorporation of a company requires a public deed (see Question 4, Notaries' fees).

 

Exemptions and reliefs

24. Are any exemptions or reliefs available to the liable party?

There are no specific exemptions or reliefs available for JVCs. However, the following taxes can be avoided if certain requirements are met:

  • Securities issuance stamp tax and corporate income taxes. If the transaction setting up the JVC fulfils the legal requirements of a tax-neutral restructuring (for example, a spin-off) (see Question 27). Securities issuance stamp taxes can otherwise be avoided by funding the JVC through shareholders' loans rather than equity.

  • Value added tax ( VAT) . By registering the JVC as a Swiss VAT payer, a refund of input VAT can be obtained.

  • Securities transfer stamp tax. This tax is not due if no Swiss securities dealer according to the Swiss Stamp Act is a party or an intermediary to the transaction. In addition, this tax is not due if the transaction qualifies as a tax-neutral restructuring (see Question 21).

 

Transaction structures to minimise the tax burden

25. What transaction structures (if any) are commonly used to minimise the tax burden?

Restructuring

If the transaction setting up the JVC fulfils the legal requirements of a tax- neutral restructuring, certain taxes can be avoided (see Question 24).

 

Company reorganisations

Taxes potentially payable

26. What taxes are potentially payable on a company reorganisation?

The following taxes are potentially payable if the reorganisation does not fulfil the legal requirements to qualify as a tax-neutral restructuring:

 

Exemptions and reliefs

27. Are any exemptions or reliefs available to the liable party?

Restructuring

To qualify for a tax-neutral restructuring the following structures are available:

  • Legal mergers. See Question 21.

  • Quasi- mergers (share-for-share exchanges). This is where a company exchanges its own shares against shares of another company. Such transactions are tax-neutral if the company controls at least 50% of the voting rights of the target company after the transaction, and if the target shares are acquired at book value. Where consideration other than newly issued or own shares is used, the transaction can also be tax-neutral provided that the consideration does not exceed 50% of the value of the transferred shares.

  • Vertical demergers (spin-off and split-off). The transfer of assets from a company to another company in return for shares qualifies as tax-neutral restructuring if the following conditions are met:

    • a whole business unit is transferred;

    • the unit is transferred at tax book values;

    • both companies pursue a business after the restructuring, through at least one business unit; and

    • both businesses remain subject to unlimited corporate income taxes in Switzerland.

    Unlike for intra-group transfers of assets, there is no lock-up period for such demergers. Demergers of real estate, holding, finance and licensing companies must fulfil additional requirements in order to be tax-neutral.

  • Horizontal demergers. This is where a Swiss company transfers business units or any fixed business asset to one of its Swiss subsidiaries. Tax-neutrality is available if the transaction occurs at book value and if a lock-up period of five years is respected. This lock-up period applies both in respect of the transferred assets and the shares hold by the transferring entity in its subsidiary.

  • Intra-group transfers of assets. Business units, fixed business assets and participations of at least 20% can be transferred tax-neutrally within a group. Tax-neutrality is granted if:

    • the transaction occurs at tax book value between commonly controlled entities;

    • the transferred assets remain subject to unlimited Swiss taxes; and

    • a lock-up period of five years is respected, which applies both in respect of the disposal of transferred assets and on the common control of entities.

  • Transformations. A company that changes its legal form benefits from tax-neutrality provided that the company remains liable to Swiss taxes and that the tax book values remain unchanged.

 

Transaction structures to minimise the tax burden

28. What transaction structures (if any) are commonly used to minimise the tax burden?

Restructuring

The various tax-neutral structures mentioned in Question 27 are commonly used to minimise the tax burden.

 

Restructuring and insolvency

29. What are the key tax implications of the business insolvency and restructuring procedures in your jurisdiction?

A Swiss company is considered insolvent if its assets no longer cover its liabilities, after taking into account open and hidden reserves.

Corporate income taxes

The following contributions by shareholders are tax-neutral:

  • Contributions without consideration (à fond-perdu).

  • Open recapitalisation (that is, the reduction of nominal capital without repayment directly followed by a capital increase).

  • Debt waiver, if the loan would not have been granted by a third party.

The following forms of recapitalisation are considered as extraordinary income, but can be set off against carried forward losses:

  • Debt waiver by third parties and by shareholders, if the loan would have been granted by third parties.

  • Contributions without consideration by third parties.

Securities issuance stamp tax

Recapitalisation measures are generally exempt, if the amount does not exceed CHF10 million. In addition, in the case of hardship, the tax authorities can waive the issuance stamp tax duty for recapitalisations exceeding CHF10 million.

Withholding tax

Withholding tax is usually not triggered on recapitalisation measures.

 

Share buybacks

Taxes potentially payable

30. What taxes are potentially payable on a share buyback? (List them and cross-refer to Questions 4 to 7as appropriate.)

To determine the potentially payable taxes, a share buyback must be qualified either as an ordinary purchase or a partial liquidation.

Purchase

If the company proceeds to an ordinary share buyback, no taxes are levied, in particular no withholding tax is due (see Question 7).

Partial liquidation

In a partial liquidation, the shares are being bought back in order to achieve a capital decrease, or the buyback is qualified as such for tax purposes. In such a case, the withholding tax is due on the difference between the nominal value of the shares and the consideration paid for the buyback.

In cases where shares bought back are not resold within six years (12 years in cases of share buyback listed to bond issues or employee share option plans (ESOPs)), consequences similar to those of a partial liquidation apply.

 

Exemptions and reliefs

31. Are any exemptions or reliefs available to the liable party?

Share buyback as a purchase

The following legal requirements must be fulfilled to benefit from certain tax advantages:

  • The company does not hold more than 10% of its own shares.

  • The buyback was not made for a capital reduction.

  • The company sells the shares within six years (12 years in certain cases).

If the six-year (or 12-year) period or if the 10% threshold are not respected, the tax authorities will requalify the transaction as a partial liquidation and withholding tax will be due (see Question 30, Partial liquidation).

 

Transaction structures to minimise the tax burden

32. What transaction structures (if any) are commonly used to minimise the tax burden?

Companies intending to buy back shares for a capital reduction usually open a second trading line in order to optimise the purchase from a withholding tax point of view.

In the case of an ordinary purchase, a company must not hold more than 10% of its own shares and must sell the shares with a six-year (or 12-year) period in order to avoid the tax treatment applied to a partial liquidation (see Question 30, Partial liquidation).

 

Private equity financed transactions: MBOs

Taxes potentially payable

33. What taxes are potentially payable on a management buyout (MBO)?

MBOs structured as share deals are subject to the usual tax consequences (see Question 10).

 

Exemptions and reliefs

34. Are any exemptions or reliefs available to the liable party?

There are no specific reliefs or exemptions available for MBOs.

 

Transaction structures to minimise the tax burden

35. What transaction structures (if any) are commonly used to minimise the tax burden?

To minimise the tax burden, the management often uses a holding company to acquire the shares. If the shares are financed with debt, no push down on the target company is possible, as each entity is considered separately under Swiss law. In addition, a merger between the holding company and the target company would be viewed as abusive by tax authorities. Therefore, the share price is generally kept as low as possible at acquisition (for example, by distributing dividends before the transaction or by reducing the capital of the target company).

 

Reform

36. Please summarise any proposals for reform that will impact on the taxation of corporate transactions.

In September 2014, the Federal Council initiated a consultation of a legislative draft for the Swiss Corporate Tax Reform III, which was submitted to Parliament on 5 June 2015. It is expected that this reform will enter into force on 1 January 2019.

This reform aims to align Swiss law with international standards regarding corporate taxation, in particular by suppressing special tax statuses, such as the cantonal and municipal holding, domicile and mixed company status, as well as the principal and finance branches status at the federal level. To keep Switzerland a global attractive business location, the reform is expected to introduce the following measures:

  • Introduction of a patent box on a cantonal level to lower the taxation of income from patents, based on a "modified nexus approach" in order to ensure that only the income related to Swiss research and development (R&D) expenses will benefit from a reduced taxation.

  • Tax deductions relating to expenses incurred for R&D will be increased.

  • Step-up of the unrealised gains when switching from a special status to an ordinary one (that is, when the Corporate Tax Reform III enters into force). The step-upped reserves will need to be written down tax-effectively according to ordinary rules.

  • Lower cantonal corporate income taxes (for example, Vaud intents to lowers its tax rates to 13.79%, Geneva to 13 to 15% and Zürich to 14%).

  • Abolition of the securities issuance stamp tax (see Question 4, Securities issuance stamp tax).

 

Online resources

Official Website of the Swiss Confederation

W www.admin.ch/gov/en/start.html

Description. This website is maintained by the Swiss administration and provides official and up-to-date information about federal legislation. The website usually provides unofficial translations in English.

Swiss Federal Tax Administration

W www.admin.ch/gov/en/start.html

Description. This website contains publications, circular letters and other tax information. English translations are generally not available.



Contributor profile

Jean-Blaise Eckert, Partner

Lenz & Staehelin

T +41 58 450 76 00
F +41 58 450 70 01
E jean-blaise.eckert@lenzstaehelin.com
W www.lenzstaehelin.com

Professional qualifications. Switzerland, Neuchâtel Bar, 1989; Certified Tax Expert, 1994

Areas of practice. Tax; private clients; contract and commercial; internal investigations.

Non-professional qualifications. Master in Law (lic. iur.), University of Neuchâtel; MBA, Berkeley University, 1991

Languages. French, English, German

Professional associations/memberships.

  • Member of the Executive Committee and Vice-President of the International Fiscal Association (IFA).
  • Member of the Committee of the Swiss Branch of the International Fiscal Association (IFA).
  • Reporter to the IBA and IFA congress on Swiss tax matters.
  • Teacher in the Masters programmes of the University of Geneva and University of Lausanne.

Publications (selection)

  • Hinny, P., Eckert, J.-B., Droit fiscal 2015, Recueil de textes avec renvois, index et remarques, Zurich 2015.
  • Rüdisühli, H., Eckert, J.-B., Corporate Tax 2015 - Switzerland, in: The International Comparative Legal Guide to Corporate Tax 2015, 239-247.
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