Insights

Circular No. 32a of the Federal Tax Administration (FTA), published on January 20, 2025, deals with the tax treatment of restructuring measures for corporations and cooperatives.

The accounting treatment of waiver income is crucial for determining its exemption from Swiss corporate income tax. Recently, the Swiss federal tax authorities issued a new circular letter (number 32a) addressing the financial restructuring of corporations and cooperatives. According to this guidance, waiver income from shareholders that is directly recorded in the company’s equity should always be exempt from Swiss corporate income tax.

Swiss Federal Tax Administration (FTA) annually publishes recognized interest rates applicable for tax assessments of advances and loans in Swiss francs and in foreign currencies.

Practice and doctrine assume different points in time for the due date of hidden profit distributions. The Swiss federal supreme court recently approved the Swiss federal tax authorities’ complaint in matters of public law against the judgment of the Federal Administrative Court and confirmed that the due date of hidden profit distributions should be the booking date. For simplicity and practical reasons, the end of the financial year is considered as the due date for several hidden profit distributions. Late interest of currently 4.75% becomes due 30 days after due date of hidden dividend distributions. To cover withholding tax liabilities and late interest thorough tax indemnification is crucial in M&A transactions.

Transfer prices must comply with the arm’s length principle, according to which transactions between affiliated companies should follow the same conditions that would be agreed between third parties. The Swiss legislator has not enacted any specific laws on transfer pricing. However, the arm’s length principle is implemented on the basis of various provisions in tax laws.

On 4 September 2024, the Federal Council decided to introduce the GloBE Income Inclusion Rule as of 1 January 2025 that supplements the OECD/G20 minimum taxation as in force since 2024.

According to commercial law, a corporation may acquire its own shares provided it has freely disposable equity in the amount of the acquisition value and the nominal value of the own shares does not exceed 10% of the share capital according to the commercial register. If the acquisition is in connection with a restriction on transferability, the maximum limit is 20%. Shares acquired in excess of 10% must be sold within two years or canceled through a capital reduction.

A taxpayer had a debt to a Swiss limited liability company/GmbH held by him, for which the cantonal tax authorities had refrained from claiming a personal taxable income under certain conditions communicated in writing and accepted by the taxpayer. The taxpayer/borrower subsequently breached these conditions with the result that the cantonal tax authorities qualified the loan receivable as a simulated loan.

An indirect partial liquidation clause is standard in share purchase agreements. However, buyers are well-advised to carefully plan the acquisition of a Swiss target company as well as the subsequent integration and prepare together with sellers a defensive argumentation to disprove application of the indirect partial liquidation theory.

The Swiss federal supreme court recently confirmed the long-standing practice that hidden profit distributions are committed by submitting incorrect annual financial statements to the Swiss federal tax authorities.

The Swiss federal supreme court has ruled that taxpayers must decide whether they wish to claim the CHF 10m Swiss stamp tax exemption threshold or creation of qualified capital contribution reserves. The CHF 10m Swiss stamp tax exemption can only be claimed, if contributions/financial restructuring income are offset against losses that must be proven by a timely booking entry.

In December 2023, the Federal Council decided to introduce the OECD/G20 minimum taxation as of January 1, 2024 and will levy a top-up tax in Switzerland.

Swiss Federal Tax Administration (FTA) annually publishes recognized interest rates applicable for tax assessments of advances and loans in Swiss francs and in foreign currencies.

On December 22, 2023, the Federal Council informed about their decision to implement the OECD minimum tax concept as planned by January 1, 2024. Switzerland therefore will be a frontrunner in the implementation of the OECD tax reform together with other major European OECD member states.

As of January 1, 2020, a notional income tax deduction for highly equity financed corpora-tions was introduced. Cantons with an effective profit tax burden of at least 18% are entitled to grant such notional interest deductions for cantonal taxes on certain qualifying equity. No deduction applies for direct federal tax. The reduction via application of the notional interest expense on equity capital is not granted on the entire equity, but on the security equity capital to be defined. The imputed interest rate is based on the yield for ten-year federal bonds, alt-hough a considerably higher third-party interest rate may also be applied for intra-group fi-nancing activities of the company.

Swiss voters approve OECD minimum tax/Pillar Two concept to embed into fiscal regulations.