Subsidiary Spin-off (horizontal demerger) / Swiss Tax Consequences

Preliminary remarks

In case of subsidiary spin-off (also called horizontal split), the transferred assets are moved to a new or already existing Swiss subsidiary, in which the transferor company has a stake. From a civil law perspective the transfer may be done through contributions in kind. Sale or transfer of assets at taxable value (Art. 69-77 FusG). Note that in  case of spin-off of qualifying participation, other rules apply (see Circular No. 5 of the FTA dated 1.6.2004, para. 4.4.2.2.1)




Chart






Checklist - Tax consequences of the subsidiary spin-off


                                                  Taxes for


Types of taxes

Demerging AB

New B-AG (subsidiary)

Shareholders

Income taxes (FITA/CCITHA)- Deferral of taxation of hidden reserves, provided that:
  • Transfer of business units or items of fixed operating assets (Art. 61 para. 1 and Art. 61 para. 1 lit. d FITA)1;
  • Transfer at tax values;
  • Acquired B AG domestic subsidiary (10% stake) or domestic establishment of a foreign subsidiary;
  • Tax liability in Switzerland of B or of the Swiss permanent establishment of B given;
  • No violation of the holding period (i.e. no sale of the transferred assets or ownership in the acquiring subsidiary for five years(Art. 61 para. 2 FITA)
- At the cantonal level, the holding privilege may apply. 
- Tax-neutral earnings open and hidden capital contribution (Art. 60 lit. a FITA)- Unaffected

Real estate capital gains tax/Real estate transfer tax

- Transferof real estate under civil law Tax-deferral (Art. 12 para. 4 lit. a CCITHAand real estate transfer tax-exempt (Art. 103 FusG)
  
Withholding tax (WHTA) - None  
Stamp tax (STA) (Stamp issuance tax/Stamp transfer tax)Stamp transfer tax: Contribution in kind of taxable securities exempt Art. 14 para. 1 lit. b STA  
Stamp issuance taxArt. 5 para. 1 lit. a STA (capital increase) and Art. 5 para. 2 lit. a STA (capital contribution), but exempted under Art. 6 para. 1 lit. abis STA, in principle only share capital according to the Circular No. 6 of the FTA dated 6.6.1997 

Stamp transfer tax: Exemption under Art. 14 para. 1 lit. i StG of acquired third-party obligations
 
Value added tax (VAT) - Check reporting under transfer of a going concern provision (Art. 38 VATA)- Check VAT liability under Art. 10 VAT Act

- Own use or deduction of input VAT?


- New company of an existing VAT group?
 

Fixed operating assets: these are assets which are directly or indirectly used for the business operations of the company.


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