Merger Gain






Preliminary Remarks

A merger gain results from the positive difference between book value of the transferred assets and their fair market value and is taxable as it is considered as income from participations (art. 61 para. 5 DFITA). If the conditions are fulfilled, the participation exemption is applicable (see art. 69 DFITAart. 28 para. 1 StHG). However, the participation exemption cannot be claimed if the relevant tax book value of the shares is less than cost price. In this case, a restored depreciation is available to the extent of the difference between the cost and the tax book value of the investment.  


Legal Text

Art. 611 DFITA - Restructurings

(.....)

 Should a loss arise on the accounting books with respect to a participation in a joint-stock company or cooperative by virtue of the acquisition of its assets and liabilities and should the participation rights belong to the acquiring joint-stock company or cooperative, the loss may not be deducted for tax purposes. An accounting profit on the participation, if any, shall be taxed.

1 Amended in accordance with para. 7 of the Merger Act of 3 October 2003, in force since 1 July 2004 (AS 2004 2617BBl 2000 4337).

Tax consequences of a merger gain

Balance sheet mother company

Balance sheet subsidiary

Current assets       

        1'000

400

Debt

Current assets         

        400

100

Debt

Holding Subs.

          200

200

Share capital

          

       

200

Share capital 

 

 

600

Reserves

 

       

100

Reserves

        Total

        1'200

1'200

Total

        Total

      400

400

Total



Balance sheet mother company

(after absorption of the subsidiary)

Current assets

1'400

500

Debt

 

 

200

Share capital

 

 

700

Reserves (incl. merger gain)

Total

1'400

1'400

Total


The mother company achieves, by the absorption of the subsidiary, a merger gain of 100 (equity (share capital + reserves) of the subsidiary 300 ./. shares value subs. of 200). This merger gain is taxable pursuant to art. 61 para. 5 DFITA. If the requirements are fulfilled according to art. 69 ff. DFITA, participation relief may be applicable.  
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