Asset Deal / Swiss Tax Consequences

Preliminary remarks

The tax consequences of the sale of all or parts of the assets of a share corporation are discussed below. The tax consequences of liquidation will be presented in a separate chapter. 


Chart




Checklist - Tax consequences of the asset sale of a share corporation (Asset Deal)

Taxes for


Types of taxes

Selling A AG

Buying B AG

Income taxes (FITA/CCITHA) - In principle, taxable realization of hidden assets (i.e. difference between purchase price and tax value) (Art. 58 FITAArt. 24 para. 1 CCITHA)

- For sale to a group company, potentially tax-neutral due to an intra-group transfer of assets (Art. 61 para. 3 und para. 4 FITA; Art. 24 para. 3quater and 3quinquies CCITHA) or due to a subsequent reinvestment (Art. 64 FITAArt. 24 para. 4 CCITHA)

- Sale of qualifying shareholdings might benefit from participation relief (Art. 69 f. FITAArt. 28 para. 1 und 1bis CCITHA)

- Holding companies, which qualify for the holding privilege under Art. 28 para. 2 CCITHA, are not subject to income tax on a cantonal level 

- Potential for income effective tax depreciation on acquired assets

- Interest on acquisition loans income tax deductible
Real estate capital gains tax
/ Real estate transfer tax
- For sale of real estate, that is located a monistic canton capital gains tax possible

- Ensure contractually that no lien is recorded for seller's tax on real estate capital gains  
Withholding tax (WHTA) - In principle no withholding tax, unless assets sold at a rate below an arm's length price to related parties (Art. 4 WHTAArt. 20 WHTA)

- In principle no withholding tax, unless assets are sold above an arm's length rate to buyer being a related parties (Art. 4 WHTAArt. 20 WHTA) 
 
Stamp tax (STA) (Stamp issuance duty / Stamp transfer duty) - In principle no stamp tax, except stamp transfer transfer duty on sale of taxable securities (Art. 13 f. STA) provided that a securities dealer is involved and no exception applies (for instance no restructuring exception applies Art. 14 para. 1 STA)  - In principle no stamp issuance tax, except for an undervalued purchase from a shareholder (Art. 5 para. 2 lit. a STA)

- Check stamp transfer tax liability 
Value added tax (VAT) - For persons subject to VAT, in principle transactions are taxable unless there is an exemption or a zero rating that applies (Art. 1821 and 23 VAT Act) 
 - Reporting of a going concern (notification procedure) to be considered 
(Art. 38 VAT Act); for clause see here

 

Case study

Facts

Mr. X, domiciled in Switzerland, has built a successful business in Switzerland. He is now in the phase of his career in which he's dealing with the future of his company. Because he has no descendants who are interested in taking over the business, he has sought and successfully procured a buyer. The company is not directly held by Mr. X, but indirectly operated by Y AG, in which Mr. X holds all shares. A foreign corporation would now like to acquire this company at an attractive price, Mr. X and the corporation agreed on an asset deal in which the assets and liabilities of the company are bought by the corporation from Y AG. 


Advantages and disadvantages of an asset deal 

  Mr. X, Share capital of Y AG in his private assets Buyer, foreign corporation
Advantages   - In an asset deal, the tax risks remain in principle with Y AG, if the foreign corporation acquires only certain assets from it and if Y AG operates a business after the sale (avoidance of tax risks) 

Off-setting of interest on debt (interest costs from debt financing of the purchase price) may be made by the corporation if it acquired the company through an asset deal 

Higher deduction potential: In an asset deal, the corporation will take over the assets at their market value and this high value represents a higher basis for deduction (reduction from future taxable earnings of the acquired company)

Disadvantages - The sale of Y AG assets is not advantageous for Mr. X because Y AG (assuming no off-settable losses are available) would realize taxable income (taxable capital gains)

- A future distribution of the purchase price paid to Y AG to Mr. X. leads to a
 taxable investment income instead of a tax-free capital gain of Mr. X

- The
 tax risks remain with Y AG
 - In an asset deal, a transfer of losses from the selling Y AG to the buying company (corporation) is in principle not a