Corporate Restructuring Process in Switzerland: A Practical Guide

Concept of the Necessity for Fiscal Recognition of Restructuring 

Legal Basis

Federal Direct Tax According to Article 67, paragraph 2, of the LIFD, losses from previous years not deducted from profits can be subtracted from contributions aimed at balancing a deficit balance during restructuring indefinitely. These deductions are subject to certain legal criteria, including:

a) Restructuring

Only additional payments (contributions) made to eliminate or reduce a properly deficit balance are considered restructuring. Accounting measures such as asset revaluation, dissolution of provisions, and others are not considered restructuring for tax purposes.

b) Contributions

Restructuring contributions can come from third parties or associates, including debt waivers and non-repayable contributions. These contributions are referred to as “properly restructuring benefits” and impact profit tax.

Distinguishing between properly and improperly restructuring benefits, capital reductions and non-repayable contributions made by shareholders are considered improperly restructuring benefits.

c) Capital Contributions

Restructuring measures classified as capital contributions are subject to certain conditions. Debt waivers and non-repayable contributions, classified as open capital contributions, are credited to capital contribution reserves without tax consequences, provided they have not been used to offset deferred commercial losses.

d) Deficit Balance

Fiscal recognition of restructuring requires a properly deficit balance, characterized by losses not offset by open and/or latent reserves.

e) Uncompensated Losses from Previous Years

Properly restructuring losses must first offset uncompensated losses from previous years. Any excess can be carried forward in accordance with Article 67, paragraph 1, of the LIFD.

Anticipatory Tax Article 5, paragraph 1, letter a, of the Withholding Tax Act (LIA) states that reserves and profits of a capital corporation or cooperative, transferred during a restructuring to a Swiss capital corporation or cooperative, are not subject to anticipatory tax, provided the transferred tax substance remains taxable. This exception must be evaluated during restructuring, for example, in the case of a merger between sister companies, to determine its applicability.

Stamp Duty

The provisions of Article 6, paragraph 1, letters j and k, of the Stamp Duty Act (LT) introduce exceptions to stamp duty for certain restructuring cases, including the creation or increase of participation rights in the case of a safeguard company and open or tacit restructurings of shareholders or associates up to a franchise of ten million francs.

Participation Rights

Created or Increased in the Case of Safeguard Companies Participation rights created or increased to take over an operation are not subject to stamp duty, provided the transferring company incurs a capital loss as per Article 725, paragraph 1, of the Code of Obligations.

Franchise in Restructurings

To benefit from the franchise in restructurings, several conditions must be met, including the existence of an open or tacit restructuring, the elimination of existing losses, and associate contributions totaling less than ten million francs in total. This franchise, valid only once, can be distributed over multiple restructurings. Beyond this franchise, a reduction in stamp duty may be possible, subject to certain conditions.

Reduction of Stamp Duty

The grant of full or partial reduction of stamp duty depends on the existence of an open or tacit restructuring, and the imposition of stamp duty must have evidently severe consequences. Conditions for a reduction include the elimination of losses, sustainable restructuring, the absence of reserves, and other listed criteria.

Restructuring in the Context of Formal Liquidation

In the case of additional payments made in the context of the formal liquidation of a Swiss company or cooperative, the AFC waives the collection of stamp duty.

Contact us to start your initial consultation now. We would be delighted to meet you and define the next steps for the restructuring of your company in Switzerland. Fill out our contact form or call us at +41(0)22 566 82 44.