Insights

The accounting treatment of waiver income is crucial for determining its exemption from Swiss corporate income tax. Recently, the Swiss federal tax authorities issued a new circular letter (number 32a) addressing the financial restructuring of corporations and cooperatives. According to this guidance, waiver income from shareholders that is directly recorded in the company’s equity should always be exempt from Swiss corporate income tax.

Swiss Federal Tax Administration (FTA) annually publishes recognized interest rates applicable for tax assessments of advances and loans in Swiss francs and in foreign currencies.

A VAT Health Check ensures that a company’s value-added tax obligations are correctly fulfilled and associated compliance risks are minimized. The analysis identifies potential weaknesses in VAT processes and classifications, offering opportunities to optimize and reduce risks while achieving more efficient tax management.

Switzerland suspends the application of the most-favoured-nation clause based on a protocol to the tax treaty between Switzerland and India. Dividend distributions from Switzerland to India until December 31, 2024, will still benefit from this clause.

Geneva Citizens approved the reform of personal income taxation in Geneva.

From 1 January 2025, online platforms will be obliged to register for value added tax (VAT) in Switzerland and Liechtenstein if small consignments worth at least CHF 100,000 are sold to domestic customers via their platform within one year. This registration obligation also applies if the platform does not act as a seller itself, but merely brings buyers and sellers together. The aim of the tax obligation is to ensure that sales to domestic customers are taxed correctly and do not remain untaxed.

Employed persons who are members of a pension fund can pay a maximum of CHF 7’056 into pillar 3a in 2024. The amount paid in can be deducted from income in the personal tax return 2024. Employees who are not affiliated to a pension fund may pay in a maximum of 20 % of their net income, the maximum amount is CHF 35’280. A payment can only be made in the corresponding calendar year, retroactive payments after the end of the calendar year are not possible.

On 1 January 2025, the partially revised value added tax (VAT) law will come into force. The administrative practice associated with the changes to the law and ordinances is still largely undefined, which is why many details regarding practical implementation are still open and require individual clarification. The changes to VAT affect both national and international companies operating in Switzerland and Liechtenstein. The changes are significant as they not only have an impact on tax liability, but may also entail administrative requirements and financial consequences.

Practice and doctrine assume different points in time for the due date of hidden profit distributions. The Swiss federal supreme court recently approved the Swiss federal tax authorities’ complaint in matters of public law against the judgment of the Federal Administrative Court and confirmed that the due date of hidden profit distributions should be the booking date. For simplicity and practical reasons, the end of the financial year is considered as the due date for several hidden profit distributions. Late interest of currently 4.75% becomes due 30 days after due date of hidden dividend distributions. To cover withholding tax liabilities and late interest thorough tax indemnification is crucial in M&A transactions.

The current valuation of real estate in the Canton of Zurich dates back to 2009. Several court rulings in recent years have confirmed that the current tax values are lower than market values and no longer comply with federal law. According to federal regulations, the taxable value of a property must not be less than 70% of its market value, and the imputed rental value must not be less than 60% of the market rent. An expert report commissioned by the cantonal tax office determined that, since 2009, market values of single-family homes and condominiums in the Canton of Zurich have increased by an average of over 50%, while rents for rental apartments have risen by around 15%. This prompted a revaluation of all properties, which will take effect on January 1, 2026.

Transfer prices must comply with the arm’s length principle, according to which transactions between affiliated companies should follow the same conditions that would be agreed between third parties. The Swiss legislator has not enacted any specific laws on transfer pricing. However, the arm’s length principle is implemented on the basis of various provisions in tax laws.

The Federal Supreme Court has clarified in two recent rulings that financial transfers within the same municipality are not to be classified as subsidies. Based on these rulings, municipalities should review how such financial transfers are treated for VAT purposes and assess the potential impact of this new VAT classification on their autonomous departments.

On 4 September 2024, the Federal Council decided to introduce the GloBE Income Inclusion Rule as of 1 January 2025 that supplements the OECD/G20 minimum taxation as in force since 2024.

According to commercial law, a corporation may acquire its own shares provided it has freely disposable equity in the amount of the acquisition value and the nominal value of the own shares does not exceed 10% of the share capital according to the commercial register. If the acquisition is in connection with a restriction on transferability, the maximum limit is 20%. Shares acquired in excess of 10% must be sold within two years or canceled through a capital reduction.

A taxpayer had a debt to a Swiss limited liability company/GmbH held by him, for which the cantonal tax authorities had refrained from claiming a personal taxable income under certain conditions communicated in writing and accepted by the taxpayer. The taxpayer/borrower subsequently breached these conditions with the result that the cantonal tax authorities qualified the loan receivable as a simulated loan.

An indirect partial liquidation clause is standard in share purchase agreements. However, buyers are well-advised to carefully plan the acquisition of a Swiss target company as well as the subsequent integration and prepare together with sellers a defensive argumentation to disprove application of the indirect partial liquidation theory.