1. Facts
TopCo (US) contributes its operating OpCo (NL) to its subsidiary HoldCo (CH) on March 1, 2023, via a contribution in kind (in exchange for KER). The contribution is made at a conservatively estimated value of CHF 100 million. By the end of August 2023, the final valuation report is available; according to a DCF valuation, the value of OpCo is CHF 140 million. The investment is revalued by CHF 40 million in September 2023 (alternative: in April 2024).
Following approval of the 2023 financial statements by the Annual General Meeting, a KER of CHF 140 million will be claimed in May 2024 by submitting Form 170.
Questions
- To what extent can the KER be confirmed by the FTA?
- Are there alternatives to the chosen approach?
- What would be the tax implications regarding the collection of withholding tax if the FTA were to accept the value of the OpCo only up to CHF 80 million?
- What would the withholding tax consequences be if OpCo were liquidated in 2026?
1. Facts
On May 30, 2021, TopCo acquires TargetCo from the independent XCo for a price of CHF 100 million plus an earn-out payment of up to CHF 40 million after three years. On August 15, 2021, TopCo contributes the newly acquired TargetCo to the KER of its subsidiary HoldCo as a contribution in kind valued at CHF 100 million.
Following approval of the 2021 financial statements, HoldCo applies for a KER of CHF 100 million by submitting Form 170.
On May 30, 2024, TopCo makes the earn-out payment of CHF 40 million, which has become due based on business results.
After approval of the 2024 annual financial statements, HoldCo applies for an additional KER of CHF 40 million by submitting Form 170.
Alternative: TopCo makes a contribution of CHF 100 million to HoldCo’s KER, equivalent to the purchase price, and HoldCo in turn acquires TargetCo from XCo on May 30, 2021. On May 30, 2024, TopCo assumes HoldCo’s debt obligation and makes the earned-out payment of CHF 40 million to XCo.
Questions
- To what extent can KERs be confirmed?
- Are there alternatives to the chosen approach?
- Variant: To what extent can KERs be confirmed?
- Variant: What are the withholding tax consequences if TargetCo is liquidated in 2026?
1. Facts
X. AG, held by X., has two business units: Business Unit A and Business Unit B.
The intention is to spin off Business Unit B as part of a de jure spin-off.
X. AG has a share capital of CHF 100,000.
Question
- How can the spin-off be structured without triggering withholding tax consequences for X. due to a gain on par value?
1. Facts
On September 15, 2024, a private equity fund acquires the domestic company X AG (share capital: CHF 1 million; no KER) through the acquisition company Y AG (share capital: CHF 1 million), which is also domiciled in Switzerland, for CHF 100 million from a domestic seller. Y. AG is held by Z. Sàrl, which is based in Luxembourg.
Y. AG receives a grant of CHF 30 million from the fund as well as a loan of CHF 40 million bearing interest at 6% p.a.
Z. Sàrl takes out a loan of CHF 30 million bearing interest at 6% p.a., which is syndicated to 12 debt funds.
Z. Sàrl makes the raised funds available to X. AG via a CHF 30 million shareholder loan bearing interest at 6% p.a.
On December 10, 2024, X. AG is absorbed by Y. AG.
Questions
- What are the withholding tax implications of the absorption of X. AG?
- What are the withholding tax implications of X. AG’s interest payments on the shareholder loans?
1. Facts
On June 30, 2022, the domestic company X. AG received an open-ended loan of USD 100 million from its sister company Y. BV, which is based in the Netherlands, bearing interest at 2.75% p.a. Interest is due on June 30 of each year.
On June 10, 2024, the agreement between X. AG and Y. BV is amended, and the interest rate is increased to 4.75% effective July 1, 2025 (to comply with the maximum interest rate specified in the FTA circular of January 30, 2024).
X. AG must pay an average of 3% p.a. on the USD loans granted by third parties for the 2024/2025 interest period.
Question
- What are the withholding tax implications of the contract amendment dated June 10, 2024?
1. Facts
The domestic company X. AG has 10 shareholders, each holding a 10% stake in X. AG. Since it urgently needs liquidity (and no bank is willing to lend it money), it asks its shareholders for loans.
Four shareholders (alternative: six shareholders) are willing to grant X. AG a loan of CHF 1 million each on June 30, 2024, with a term of two years, bearing interest at 12% p.a. (payable at maturity). X. AG accepts these terms and enters into loan agreements, which are approved by a 70% majority at an extraordinary general meeting of X. AG.
X. AG has no outstanding debt to third parties.
Question
- Is there a monetary benefit within the meaning of Art. 4 para. 1 lit. b VStG?
1. Facts
X Ltd, domiciled abroad, is relocating its registered office to Switzerland. At the time of the relocation, it holds 5% (alternative: 15%) of its own shares (which was permissible under foreign law).
Questions
- Consequences regarding the six-year period under Art. 4a para. 2 VStG?
- Consequences regarding the 10% rule under Art. 4a para. 1 VStG in conjunction with Art. 659 OR?
1. Facts
X AG (share capital: CHF 10 million) is relocating its registered office to Luxembourg. At the time of the relocation, it is 90% owned by Y BV, which is based in the Netherlands; it holds 10% in treasury stock, which it repurchased three years earlier from its minority shareholder M (resident in Monaco) for CHF 20 million. The net asset value of X AG (taking hidden reserves into account) amounts to CHF 200 million at the time of the relocation.
Question
- What are the implications regarding withholding tax?
1. Facts
The operating company X AG has a share capital of CHF 500,000; as of January 1, 2020, the shares are held by the following parties:
- A (co-founder): 20%
- B (co-founder): 20%
- C (co-founder): 20%
- D, E, F, and G: 10% each (employees)
Co-founder A wishes to reduce his stake and sells 10% to X AG on March 1, 2020, at a market value of CHF 1 million.
On May 30, 2023, the General Meeting resolves, for the purpose of allowing additional employees to participate, to create different classes of shares and to carry out a related capital increase of CHF 50,000. Specifically, the existing issued shares are converted into so-called Class A shares, which entitle the holders to a corresponding share of the existing reserves. The newly created shares and the treasury shares now qualify as so-called B shares, which entitle the holders to a share of the reserves created from 2024 onward.
The newly created shares and the treasury shares will be sold to various employees at the end of 2023 at a total market value of CHF 1 million.
Questions
- What are the implications regarding withholding tax?
- If so, who qualifies as a beneficiary?
1. Facts
The publicly traded X AG has a share capital of CHF 100 million; as of December 31, 2023, it holds treasury shares amounting to 10%, which it purchased on the stock exchange over the past four years at a price of CHF 80 million. Pursuant to a resolution of the General Meeting, the par value is to be reduced to CHF 1.00 as of January 1, 2024. The total par value reduction of CHF 90 million is not to be paid out to shareholders but is to be used to create retained earnings.
Question
- To what extent can the KER be confirmed by the FTA?
1. Facts
The publicly traded X AG repurchased 5% of its own shares on November 1, 2019, at a price of CHF 80 million via the stock exchange. On October 15, 2024, it sold the shares at a price of CHF 110 million via the stock exchange and recorded the difference of CHF 30 million as a non-cash adjustment against KER.
Alternative: On November 1, 2025, X AG still holds the treasury shares and correctly reports the withholding tax using Form 102 (including conversion to a percentage due to the inability to pass it on); in 2027, X AG sells the treasury shares for CHF 120 million.
Question
- To what extent can the KER be confirmed by the FTA?
1. Facts
X AG is absorbed by its sister company Y AG.
X AG has a share capital of CHF 20 million and holds treasury shares with a par value of CHF 2 million, which were repurchased at the time for CHF 17 million (alternative: for CHF 23 million).
Question
- To what extent can the KER be confirmed by the FTA?
1. Facts
Patron XY owns three operating companies through HoldCo, which manufacture high-quality products that are well-known and popular worldwide; XY is regarded as a model entrepreneur in Switzerland.
The staff is employed by Mgt.Co and insured for occupational pension coverage through the group’s own pension fund; under XY’s leadership, this fund generates above-average returns.
HoldCo holds the valuable trademark rights and thereby generates substantial licensing revenue.
XY also owns Family Office AG, which operates as an asset management company for the family (and is completely independent of HoldCo).
In 2020, the pension fund grants an independent housing cooperative a mortgage-backed loan of CHF 10 million; the housing cooperative plans to build a luxury park hotel with an investment volume of CHF 200 million.
In 2022, it is publicly revealed that the housing cooperative fraudulently misled its investors and lenders, and that the hotel’s value is only CHF 20 million. The market value of the pension fund’s loan is now only CHF 1 million.
The pension fund could easily cover the loss thanks to its other investments; the financial damage would be negligible. To prevent the pension fund from having to appear in public (and highly publicized) bankruptcy proceedings, XY decides immediately after the deception comes to light that Family Office AG will purchase the pension fund’s loan at its face value of CHF 10 million; Family Office AG subsequently writes off the loan.
Questions
- Are there any tax implications regarding the collection of withholding tax?
- If so, who qualifies as the beneficiary in this case? Cui bono?
- Does the withholding tax assessment change if the HoldCo assumes the loan at face value?
1. Facts
X. AG has been renting an apartment to its sole shareholder, X., for CHF 2,000 per month for many years. The rent is due at the end of each month (with a payment term of 30 days).
The market price for the apartment is CHF 4,000.
In addition, on January 31, 2023, X. AG sold a painting valued at CHF 2 million to X. for CHF 100,000.
In June 2024, the FTA conducts an audit of X. AG and determines that the apartment was rented at below-market rates and the painting was sold at below-market rates.
X. AG’s fiscal year corresponds to the calendar year. The general meeting was held on June 30 of the following year.
Questions
- From when is interest on arrears for withholding tax due?
- For which years can the FTA enforce its withholding tax claim?
