Current cases in the taxation of legal entities as buyers and sellers

Case 1: Acquisition structuring with SPAC

Facts

TargetCo is a start-up based in Switzerland and is in the growth phase. The founder holds 80% of TargetCo shares as private assets, and the remaining 20% are distributed among various shareholders in Switzerland and abroad. The group structure is as follows:

TargetCo wants to grow further and is looking for financing options. One option is to go public with a so-called Special Purpose Acquisition Company (SPAC).

Questions

1. What is a SPAC?
2. What are the typical phases of a SPAC transaction?
3. How can a so-called "de-SPAC" transaction be structured?
4. What are the tax consequences for the Swiss participants (legal entities) in the de-SPACs presented?

Case 2: Turnover tax in case of purchase with refinancing and earn-out

Facts

TargetOpCo, which is domiciled in Switzerland, is an operating company. All shares of TargetOpCo are held by a Swiss corporation ("SellerCo"). TargetOpCo has taken out a loan of CHFm 10 with SellerCo (variant: with a bank). TargetOpCo continues to hold only cash required for operations.

A Swiss buyer group wants to acquire TargetCo. The buyer is a subholding company domiciled in Switzerland, which is a securities dealer pursuant to Art. 13 para. 2 let. d StG.

The enterprise value of TargetCo is CHFm 50, and the purchase terms provide for a so-called "cash free/debt free" acquisition.

In the event that certain EBIT thresholds are reached, the buyer owes the seller an additional purchase price share of CHFm 10 (earn-out).

Questions

1. Is the purchase subject to the sales tax?
2. If so, what is the amount of turnover tax owed?

Case 3: Turnover tax - structuring via foreign buyer

Facts

A private equity fund has acquired an operating company domiciled in Switzerland ("OpCo") via a Dutch acquisition company ("AkquiCo"). The reporting procedure (Form 823B) has been approved by the FTA for dividend distributions from OpCo to AkquiCo. Two years after the transaction, an opportunity arises for an "add-on" acquisition in Switzerland.

In a first step, AkquiCo acquires the Swiss target company ("TargetCo") from a seller who is not a securities dealer within the meaning of the Swiss Stock Corporation Act (StG) and immediately thereafter, in a second step, contributes it to OpCo against capital contribution reserves. Three years after the contribution, TargetCo is merged into OpCo in a third step (subsidiary absorption).

Questions

1. Is step 1 subject to the turnover tax?
2. What are the offsetting and stamp duty consequences of steps 2 and 3?

Case 4: Turnover tax - mediation

Facts

B AG is a securities dealer and parent company of an international group which holds various domestic and foreign group companies. The (indirect) US subsidiary A USA Inc. acquires a target company in the USA (TargetCo). The management of B AG, which is practically identical to that of A USA Inc, negotiates the takeover of TargetCo. The transaction structure is simplified as follows:

Questions

1. Is the purchase of the TargetCo subject to the sales tax?
2. If so, are there structuring possibilities and what should be paid attention to?
3. How would the transaction be assessed from a turnover tax perspective if the planned legal changes to turnover tax law were to come into force?

Case 5: Participation deduction with simultaneous payment obligation

Facts

After the founder of a start-up based in Switzerland (TargetCo) contributed all of TargetCo's shares to a Personal Holding AG, which he owns 100%, he negotiates financing for further growth with various investors.

In a first round of financing, investors (corporations in Germany and abroad) participate in TargetCo through capital increases. The structure after the first round of financing is as follows:

In a second round of financing, a foreign financial investor takes a 10% stake in Personal Holding AG through a UK-based NewCo, and the latter, together with the minority shareholders, undertakes to pay NewCo 10% of the proceeds raised on exit in the event of a sale of TargetCo ("Exit").

The structure after the second financing round is as follows:

Four years after the second financing round, TargetCo is sold for CHFm 400. The book value (=profit tax value and cost price) of the TargetCo shares at Personal Holding AG is CHFm 10.

Questions

1. What tax issues arise from the contribution of TargetCo to Personal Holding AG?
2. What tax issues arise in the first round of financing?
3. How should the sale of TargetCo at the Personal Holding AG level be assessed for tax purposes?

Case 6: Participation deduction with retroactive purchase price adjustment

Facts

On 29 May 2008, X AG (Switzerland) sold its 28% shareholding in B NV (Belgium) to its subsidiary A NV (Belgium) for EURm 20.4. The purchase price corresponded to the book value under commercial law as well as the profit tax value and the cost price of the participation B NV. On 7 May 2009, X AG informed the tax administration of the Canton of Berne that the participation B NV had been transferred to A NV at book value. In Belgium, in such cases, the difference between the book value and the higher market value is taxable at a rate of 34%. A participation deduction was not possible. Therefore, the intention was to make an addition to the purchase contract and to subsequently increase the purchase price so that the sale ultimately took place at the market value. On 19 June 2009, X AG and A NV concluded a supplementary agreement. According to this, the purchase price for the shareholding was retroactively increased by EURm 87.6 to EURm 108.0. The purchase price adjustment was subsequently taken into account in the 2008 financial statements of A NV, but not in the 2008 financial statements of X AG.

In its tax return filed on 8 September 2009 for the tax period from 1 January to 31 December 2008, X AG did not declare any profit from the sale of the participation and did not claim any participation deduction. In the 2008 financial statements of X AG, the participation in B NV was shown in the notes at EUR 0. In the (rectified) tax return for the tax period from 1 January to 31 December 2009, X AG declared the payment of EURm 87.6 from the agreement of 19 June 2009 as a capital gain from the sale of its participation in B NV and claimed a participation deduction for it. It calculated this by basing the proportional allocation of the financing costs on the book value of the participation at the time of the sale in 2008 of approximately CHFm 32.8. This resulted in a deduction for financing costs of approximately CHFk 676, resulting in a participation deduction of approximately 10.3% for direct federal tax and of approximately 23.9% for cantonal and communal tax.

Graphically, the transaction can be simplified as follows:

Question

1. Can X AG claim the participation deduction?