Current problems of taxation of joint-stock companies and shareholders (2017)

Case 1a: Sale of a participation to a subsidiary

Facts

MUTTER-AG holds 100 percent of the shares in TOCHTER-AG and C AG. As part of a reorganisation within the Group, MUTTER AG sells its investment in C AG to TOCHTER AG at fair value.

The 2016 balance sheet of MUTTER AG is as follows (in thousands of Swiss francs):

The following information is provided on the investments:

Questions:

1. What are the tax consequences (direct federal tax) for MUTTER AG from the sale of the investment and how are the prime costs developing?
2. What are the tax consequences (direct federal tax) for TOCHTER-AG from the acquisition of the holding and how are the prime costs developing?

Case 1b: Sale of a participation to the parent company

Facts

MUTTER-AG holds a 100 percent stake in TOCHTER-AG. This company in turn holds 100 percent of the participation rights in C AG. As part of a reorganization within the Group, TOCHTER-AG sells its interest in C AG to MUTTER-AG at fair value.

The 2016 balance sheet of MUTTER AG is as follows (in thousands of Swiss francs):

Questions:

1. What are the tax consequences (direct federal tax) for TOCHTER-AG from the sale of the investment?
2. What are the tax consequences (direct federal tax) for MUTTER AG from the acquisition of the shareholding and how do the prime costs develop?

Option 1: Resale of the investment

Based on the basic facts of the case, it is assumed that MUTTER AG will sell its shareholding in C AG to a third party in 2018 at a market value of CHF 700,000.

Question:

What are the tax consequences (direct federal tax) from the sale of the investment?

Variant 2: Dividend distributions

Based on the basic facts, it is assumed that C AG will pay a dividend of CHF 50,000 from current profits to MOTHER AG in 2018.

Question:

What are the tax consequences (direct federal tax) of distributing the dividend?

Case 1c: Sale of a shareholding to a sister company

Facts

MUTTER-AG holds 100 percent of the shares in TOCHTER-AG and D AG. TOCHTER-AG holds 100 percent of the participation rights in C AG. As part of a reorganization within the Group, TOCHTER-AG sells its interest in C AG to D AG at fair value.

The 2016 balance sheet of MUTTER AG is as follows (in thousands of Swiss francs):

Questions:

1. What are the tax consequences (direct federal tax) for TOCHTER-AG from the sale of the investment?
2. What are the tax consequences (direct federal tax) for the D AG from the acquisition of the participation and how do the prime costs develop?

Variant : Fusion

Based on the basic facts, it is assumed that TOCHTER-AG and D AG will merge shortly after the sale of the holding.
Questions:

1. What are the tax consequences (direct federal tax) for TOCHTER-AG?
2. What are the tax consequences (direct federal tax) for D AG?

Case study 2: Determination of the beneficiary in the case of hidden profit distribution due to security provided by the shareholder

Initial situation

Shareholder X (natural person) holds 100% of a Immobilien AG, whose balance sheet is as follows

X has issued a personal guarantee for the amount of 500 to the financing bank. The market value of the property is undisputedly 1'000.

The finding of the cantonal tax authorities that there is hidden equity capital in the amount of 200 and that the mortgage interest expense in the amount of 5 is to be offset accordingly is protected by the court of last resort. As justification, the court stated that a financing of only 800 would stand up to third-party comparison and 200 would have to be assessed as granted by X (similar to BGer 2C_419/2015.)

Questions:

1. Is the withholding tax due on the amount of 5 and if so, who is the recipient of the benefit?
2. Does X have to expect tax consequences in his personal income from this offsetting at Immo AG?
3. Do the answers change if the owner X is a corporation?

Case study 3: Securing withholding tax

Initial situation

A Swiss holding company, whose shareholder is a 100% US Corporation with US shareholders, has holdings in Liechtenstein and various other countries outside Switzerland. The investments represent operating or holding structures for operating activities. The company is largely self-financed.

The balance sheet can be summarised as follows:

Questions:

1. Should the VSt be ensured in this case?
2. If so, for what amount?
3. Which securities would be sufficient for the purposes of the Vst?

Alternative

Same starting position. However, the Swiss holding company has recently sold a significant stake and made the funds received available to the shareholder and a subsidiary as a loan at short notice. The balance sheet on the balance sheet date is as follows:

Questions:

1. Should the VSt be ensured in this case?
2. If so, for what amount?
3. How would the matter be assessed if a Swiss bank had liquidity of 500 at the balance sheet date instead of a loan to the shareholder?

Case study 4a: Monetary value services?

Initial situation

• B AG is in liquidity problems due to a VAT audit
• A AG provides a default guarantee of CHF 1 million, which is later claimed by B AG
• B AG does not consider itself to be in a position to repay the default guarantee paid in the foreseeable future, A AG makes a corresponding value adjustment.
• The shareholders x and y know each other in business and private life and successfully operate the company JV AG through A AG and B AG, which they each hold 50% of.
• The JV AG conducts its business mainly from orders of the A AG and B AG. Without these orders, the economic survival of JV AG would be at risk, and in any case, major losses would be expected if one of the shareholders were to default.
• The amount of the default guarantee corresponds to approximately half of the AG's previous investment in JV AG.

Alternative

JV AG operates an independent business of A AG and B AG

Questions

1. Do the various constellations result in a payment in kind from A AG or is the expense in each case justified on business grounds?
2. What arguments can be put forward for/against a benefit in kind?
3. To whom were any services provided? Distinction between withholding tax and income tax?

Case study 4b: Monetary value of service

Initial situation

Shareholder X provided services (consulting, etc.) to the buyer A AG in connection with the purchase of Beteiligungs B AG, which were charged on by A AG to B AG in a second step.

The amount and the business justification of the benefits at the level of A AG are undisputed. It is also undisputed that no services from A AG to B AG should have been charged. The tax administration credited shareholder X directly with the monetary value of B AG as income and justified this approach with reference to BGE 113 Ib 223 (In this ruling, a sub-subsidiary (in this case B AG) had purchased tools from sole shareholder X at translated prices).

Question

To whom is the hidden profit distribution of B AG attributable?