1.1 Facts of the Case
According to its annual financial statements, A AG has reserves from capital contributions (KER) in the amount of CHF 1,300,000. Of this amount, the FTA has confirmed to the company that CHF 600,000, derived from a share premium, constitutes KER pursuant to Art. 5(1)^bis^ of the Tax Act. An additional CHF 700,000 in KER stems from a merger with a sister company completed in prior years. The company has not yet submitted Form 170 to the ESTV regarding this matter; in other words, it has not yet applied for the KER amount as such. The company’s remaining reserves total CHF 2,000,000.
The General Meeting has resolved that a KER amount of CHF 1,000,000, due on April 30, 20XX, shall be distributed.
The shareholder structure of A AG is as follows:
- 10% Individual, Switzerland
- 20% U.S. Inc.
- 30% Legal entity, Switzerland
- 40% Individual, BVI
1.2 Questions
- What are the tax implications of this situation with regard to withholding tax?
- What other tax consequences can the two individuals residing in Switzerland and the BVI, respectively, expect?
- How would the case be assessed if the additional CHF 700,000 KER had been reported by A AG to the FTA using Form 170 (but had not yet been confirmed by the FTA)?
2.1 Facts
X Holding AG holds a 100% stake in the operating company X AG. Furthermore, X Holding AG owns the real estate in which X AG conducts its business.
X Holding AG now sells the business property to X AG at book value of CHF 500,000 (market value: CHF 1,200,000). Two months later, X AG revalues the property.
2.2 Question
Based on Federal Supreme Court Decision 9C_690/2023 dated March 21, 2025, do the released hidden reserves qualify as reserves from capital contributions?
3.1 Facts
X AG, which operates in the building and civil engineering sector, has a share capital of CHF 100,000 (100 registered shares with transfer restrictions, each with a par value of CHF 1,000), distributed among the domestically resident shareholders A (30%), B (50%), and C (20%).
C is already 65 years old and wishes to withdraw both from the company’s day-to-day operations and from its shareholder base. Since the company owns various properties and its shares are therefore “heavy,” he has not yet found a successor to take over his 20% stake.
On the advice of the trustee and in anticipation of a resale within two years, X AG repurchases the shares at a value of CHF 50,000 per share. Two years after the repurchase, X AG still holds the 20 treasury shares.
3.2 Questions
- What are the withholding tax implications for X AG?
- How would the case be assessed if X AG had a downward capital band of 20%?
4.1 Facts
Y AG is an SME with 180 employees that operates in the field of pharmaceutical plant construction. In addition to share capital of CHF 1 million (100,000 registered shares at CHF 10 each, held by the founding family), there are also 200 profit participation certificates (without par value) enshrined in the articles of incorporation, which were issued to long-serving employees at the middle management level.
Since the employees in question are retiring and none of these participation certificates are (yet) to be allocated to their successors, Y AG is planning a buyback. A price of CHF 500 per participation certificate has been agreed upon with the holders.
4.2 Question
What are the expected withholding tax implications?
5.1 Facts
B AG has a share capital of CHF 1,000,000 (10,000 registered shares at CHF 100 each).
The company’s equity shows a negative balance of CHF 500,000. Eight years ago, B AG repurchased a 10% stake from its minority shareholder for CHF 500,000. The market price of the shares is now CHF 700,000. Based on Art. 4a(2) of the Withholding Tax Act (VStG), B AG reported the partial liquidation of the 10% stake to the Federal Tax Administration (ESTV) two years ago (35% withholding tax on CHF 400,000).
The company has now found a prospective buyer for its own equity interests, who is purchasing them at the market value of CHF 700,000.
5.2 Question
What are the withholding tax implications of the resale of the company’s own shares?
6.1 Facts
D AG has a share capital of CHF 1,000,000 (10,000 registered shares at CHF 100 each) and participation capital of CHF 500,000 (5,000 participation certificates at CHF 100 each). In total, D AG thus has a par value of CHF 1,500,000.
In 2021, D AG repurchased a total of 1,500 participation certificates from various holders at an average purchase price of CHF 200 per participation certificate. The repurchase is reported in the company’s equity as a negative amount of CHF 300,000.
6.2 Questions
- What are the withholding tax implications for D AG resulting from the repurchase of its own participation certificates?
- How would the case be assessed if the buyback had taken place in 2023?
7.1 Facts
The foreign company M AG grants its domestic subsidiary T AG a shareholder loan of CHF 5 million, which bears interest at the maximum rates published in the FTA circular.
In year N, the ESTV conducts an audit of T AG for the period N-1 through N-5. In the course of the audit, it determines that T AG has hidden equity in all of the years audited.
The loan agreement submitted indicates that, for the periods N-1 through N-3, interest is due and capitalized at the end of the fiscal year. Due to T AG’s financial situation, the loan agreement was amended at the beginning of period N-4 to stipulate that the agreed-upon interest becomes due at the end of period N. In T AG’s accounting records, interest expense is accrued periodically as of the end of fiscal year N-4 in accordance with Art. 958b of the Swiss Code of Obligations (OR).
7.2 Question
What tax consequences can be expected with regard to withholding tax?
7.3 Facts—Subordination Scenario
The initial situation is as described in the basic facts.
Due to over-indebtedness that occurred during the course of N-1, M AG grants its subsidiary a subordination agreement covering the amount owed and the interest claim. The loan agreement itself remains unchanged. The capitalization of interest in favor of M AG, which was recorded in periods N-1 through N-3, continued to be accounted for. The amount of the subordination granted was adjusted in each case to reflect the extent of the interest capitalization.
7.4 Question
Does the subordination result in any changes to the withholding tax implications?
8.1 Facts
X, a resident of Monaco, sells 100% of the shares of X AG for CHF 10 million to a third party, the domestic company Y AG. X AG (share capital: CHF 100,000) has ceased business operations and has total assets of CHF 10.3 million (cash in the amount of CHF 300,000 and a receivable from X in the amount of CHF 10 million). X AG has no debt.
8.2 Question
Does the sale of X AG have any implications for withholding tax and stamp duties?
8.3 Facts – Scenario A
In 2026, X sells only 49% to Y AG (for CHF 4.9 million). In 2028, he sells an additional 2% for CHF 100,000, and in 2030, the remaining 49% for CHF 5 million.
8.4 Question
What are the tax implications regarding withholding tax and stamp duties?
8.5 Facts – Scenario B
In 2026, X sells only 49% to Y AG (for CHF 4.9 million). In 2028, he sells an additional 1% to Y AG for CHF 100,000. In 2030, he sells the remaining 50% to Z AG for CHF 5 million.
8.6 Question
What are the tax implications in terms of withholding tax and stamp duties?
9.1 Facts
In year N, A AG sold its stake in B AG to C AG. The share purchase agreement includes an earn-out clause of CHF 200,000 for each of the years N+1 through N+3. Achievement of these targets depends on EBIT. The target is an EBIT in line with that of year N.
At the beginning of year N+1, A and A AG agree to the assignment of the rights and obligations under the share purchase agreement. No compensation is agreed upon. All earn-out targets are met. A receives CHF 200,000 from C AG in each of the years N+1 through N+3.
In year N+5, the FTA conducts an audit of A AG.
9.2 Question
What are the expected withholding tax implications?
9.3 Facts – Variant A
During the closing meeting of the audit, the monetary benefit provided by A AG to A is determined to be CHF 400,000 based on various valuation factors.
The company’s tax advisor would like the withholding tax obligation to be fulfilled through reporting rather than payment.
9.4 Question
Will the FTA approve the request for the reporting procedure?
9.5 Facts – Scenario B
In a variation of the basic facts, the tax auditor determines that A AG has agreed with its shareholder, pursuant to the assignment agreement, on compensation in the amount of CHF 300,000.
During the audit, the amount of the settlement between A AG and A is set at CHF 400,000.
9.6 Question
Will the FTA approve the application for the reporting procedure?
10.1 Facts
Shareholder B holds 100% of the shares in B AG. The company is engaged in the distribution of construction machinery (excavators, cranes, etc.). B serves as the company’s managing director. In addition, the three-member executive board of B AG consists of the head of sales and the chief financial officer.
In January of year N, the FTA announces an audit of the company covering the years N-5 through N-1.
The tax auditor determines that the company failed to charge B a reimbursement in year N-3 for the personal use of the company vehicle (purchase price excluding VAT of CHF 100,000). For both the sales director and the CFO, the private portion amounting to 10.8% of the vehicle’s value (0.9% per month according to the AHV guidelines) was deducted via the wage statement.
10.2 Question
What are the expected withholding tax implications?
10.3 Facts – Scenario A
The tax auditor determines that B AG charged its shareholder B the private portion of CHF 10,800—which had not been recorded in year N-3—in year N-2 (in addition to the private portion for year N-2).
10.4 Question
Will the FTA accept the retroactive correction?
10.5 Facts – Scenario B
B AG did not record any personal share for shareholder B for the period from N-5 to N-2. The tax auditor also notes that B AG’s financial statements for year N-1 include a settlement of the private share for the entire period from N-5 to N-1 (i.e., a retroactive settlement of the private share was made for four periods).
10.6 Question
Will the FTA accept the retroactive correction?
10.7 Facts – Variant C
The tax auditor determined that, from year N-5 through N-3, B AG did not record sales rebates from suppliers totaling CHF 20,000 per year. Instead of being paid to B AG, the amounts were transferred to shareholder B’s private bank account.
In year N-2, Shareholder B reimbursed the company a total of CHF 60,000. The amount was recorded as a reduction in cost of goods sold.
10.8 Question
How will the FTA assess the facts of the case?
FTA Disclaimer
The documents and information provided are intended solely to support the presentation of the topics covered in this seminar. They therefore have no legal validity and do not replace circulars, information sheets, or other documents published by the ESTV. They reflect the authors’ opinions and are not binding on the ESTV.
