Sale of a Shell Company

Preliminary Remarks

Trade in shell companies is defined as the sale of a majority shareholding of a share corporation which has been economically liquidated or has been rendered liquid. The company is economically liquidated or rendered liquid, if the assets only consist of bank deposits, securities or loans to beneficiaries of capital share and if the company has ceased any operational activities.     

The formal civil liquidation is however not made for tax reasons, because some income tax consequences are connected with the civil liquidation of a share corporation, i.e. the dividends from the liquidation proceeds would be taxable according to Art. 20 para. 1 lit. c FITA, respectively Art. 7 para. 1 CCITHA 

The seller, and respectively the buyer pursue different interest by the sale or purchase of equity securities:
  • The seller would like to realize a tax-free capital gain according to Art. 16 para. 3 FITA or Art. 7 para. 4 lit. b CCITHA by the sale of the capital share certificates.     
  • The buyer would like to both reduce the costs associated with the setting up of a new company (certification costs, stamp duty) and benefit from any possible loss carryforwards.    
The trade in shell companies is inadmissible from a commercial law perspective since the rules about liquidation and set up of a new company are circumvented. After carrying out a consultation procedure, the Commercial Register may remove the company from the register, as from the moment when it gets knowledge of the shell trade (see Art. 155 HRegV).

Legal Text

In FITA and CCITHA, there is no legal basis for trade in shell companies. The taxation of trades in shell companies is thus derived from the tax avoidance concept. The only legal basis regarding the trade in shell companies is to be found in Article 5 para 2 letter b of the Stamp Act

Legal Materials

Please refer to the German version.


Please refer to the German version.

Practice of Tax Authorities

Please refer to the German version.


Please refer to the German version.


Tax consequences of trade in shell companies


X hold 100% of participation in X AG, which is inactive and its balance sheet only shows liquid assets. X sells its shares to B.  

Tax consequences

With respect to federal income tax, trade in shell companies is considered a liquidation of the share corporation with subsequent formation of a new company. This assessment leads to the following tax consequences:   
  • From an income tax perspective, X does not obtain a tax free capital gain in accordance with Art. 16 para. 3 FITA, but rather taxable income from investment (final or liquidation dividend) pursuant to Art. 20 para. 1 lit. c FITA. The taxable income from investment is the difference between the purchase price of the participation rights and their nominal value as well as the reported reserve from capital contributions (capital contribution principle)    
  • For the share corporation, tax loss carry forwards expire, since there is a set up of a new company from an income tax perspective. 
  • The issuing of shares is equivalent to the transfer of ownership of the majority of the shares to a domestic share corporation or cooperative, which is economically liquidated or which has been rendered liquid (Art. 5 para. 2 lit. b in conjunction with Art. 5 para. 1 lit. a STA). The share corporation must pay stamp duty.    
  • X is jointly liable for the payment of stamp duty (Art. 10 para. 1 STA). 
  • From a withholding tax perspective, trade in shell companies is considered a liquidation of the share corporation. Withholding tax is then due on the difference between the purchase price and the nominal value of the shares.