Current problems of taxation of joint-stock companies and shareholders (2019)

Case 1: Quasifusion / Transposition

Facts

A is an entrepreneur and holds various participations, X 100%, Y 50% and Z 20% (all operating companies), and would like to transfer these to a new holding company H, which he holds 100%.

The balance sheets and market values (VW 100% each) of the shareholdings X, Y and Z are as follows.

Question

Can holdings X, Y and Z be transferred to the new holding company H in a tax-neutral manner? If so, under what conditions?

Variant A

A also wants to transfer his securities portfolio (shares of less than 5%) with a market value of 100 to the holding company H.

Question

Can the securities portfolio be transferred to the new holding company H in a tax-neutral manner? If so, under what conditions?

Variant B

In view of the company succession, A sells his shares in the holdings X, Y and Z at market value against a loan to company H, which is wholly owned by his son B. A then transfers the loan free of charge to his son B.

Question

How do you assess the transaction from a tax perspective?

Variant C

A transfers his shareholding X at fair market value to the stock corporation H, which is independent of him, and in return receives shares from company H with a 12% shareholding (pro rata nominal value of 300, no capital contribution reserves) and a cash settlement of 100 (i.e. less than 50% of the fair market value of the shareholding). H issues 8% new shares in the context of a share capital increase and uses 4% of its own shares (proportional fair value 300, book value 100). X pays a dividend to H after one year.

Question

How do you assess the transaction from a tax perspective?

Variant D

Same situation as C. After 4 years, company X is merged into company H without significant involvement of A.

Question

How do you assess the transaction from a tax perspective?

Variant E

A transfers his shareholding X at fair market value to the stock corporation H, which is independent of him, and in return receives shares from company H with a share of 6% (pro rata nominal value 150, no capital contribution reserves) and a cash settlement of 550 (i.e. more than 50% of the fair market value of the shareholding).

Question

How do you assess the transaction from a tax perspective?

Case 2: Breakthrough / requalification in wages

Facts

A AG is a public limited company based in Switzerland and active in the packaging industry. Mr Z is the sole shareholder of A AG and would like to plan his succession. After various unsuccessful discussions with independent third parties, he sells the company to his employees. As Mr. Z had a central role in the acquisition of orders in the past, the new shareholders and Mr. Z agree that Mr. Z will continue to support A AG in an initial phase and will receive a commission for new business concluded. The commission is 1% of the contracts concluded for A AG. Mr Z will invoice his services to A AG via his consulting company Z AG. He himself has an employment contract with Z AG and draws a salary of CHF 30,000 p.a., on which he pays social security contributions.

Questions

In 2016, Mr. Z will broker transactions of CHF 50 million to A AG and Z AG will issue an invoice for CHF 500,000.

1. What are the conditions for tax recognition of the commission payment of CHF 500 000 between A AG and Z AG?
2. Are the conditions for tax avoidance or total or partial enforcement met?
3. What are the tax consequences of a crackdown?

Variant A - Underpriced sale of A AG

Analogue base scenario. A AG was sold to the employees for a total of CHF 7 million. The net asset value of A AG is CHF 10 million. In the sales contract it was agreed that Mr. Z is entitled to invoice consulting services in the amount of up to CHF 3 million to A AG in the two subsequent years.

Questions

1. Can the CHF 7 million be accepted as fair value for the sale of P AG?
2. How are the commission payments of 1% to A AG to be assessed under this aspect?

Variant B - Directors' fees

Analogue base scenario. Mr. Z will continue to serve on the Board of Directors of the Company after the sale of A AG to his employees. His board of directors' fee of CHF 30,000 p.a. is invoiced through his Z AG.

Questions

1. Special features of directors' fees?
2. What are the tax consequences?

Case 3: Initial Coin Offering

Subject - Utility Token

The Innovation GmbH is an IT company and wants to develop a new digital platform (software) based on the Blockchain technology for more efficient processing in international trade. The Company intends to conduct an Initial Coin Offering ("ICO") to finance the platform development. On the Ethereum block chain, "Innova Token" are to be issued against Ethereum (ETH). According to the ICO Terms and Conditions, the issue price for an Innova Token is 0.00625 Ethereum, and 12'000'000 Innova Token are to be issued. The majority of tokens are to be sold to companies in international trade (exporters, importers, traders, distributors, etc.). The ICO is successful and all 12'000'000 tokens are issued.

The Innova Token entitles the holder to use the platform developed by Innovation GmbH. Beyond that, no participation or ownership rights are associated with the token. Token holders are not entitled to a refund of the amount paid in.

Question

What are the tax consequences at the level of the token issuer and token holders - at the time of the ICO, project development and a later sale of the tokens?

Variant A - Asset Token

After development, Innovation GmbH intends to make the software available to companies in international trade for a license fee. According to the ICO Terms and Conditions, the Innova Token entitles the holder to 10% of the license fees. The majority of the tokens are to be sold to investors. The license fees are distributed to the token holders via a Smart Contract. Token holders are not entitled to a refund of the amount paid in.

Question

What are the tax consequences at the level of the token issuer and the token holders - at the time of the ICO, the project development, the payment of the 10% license fees to the token holders and a later sale of the Innova Token?

Option B - Employee participation

Same facts as variant A. At the time of the ICO, employees receive Innova Token free of charge from the company.

Question

What are the tax consequences for employees in relation to the Innova Tokens allocated to them?

Case 4: Adjustments to the capital contribution principle

Facts

Munot Holding AG, headquartered in Schaffhausen, is listed on the Swiss stock exchange. In March 2021, the Annual General Meeting decides to distribute a dividend of 10% from KER on the basis of the 2020 financial statements.

Question

Tax consequences for withholding tax / income tax?

Variant A

Analogue base scenario with the following two characteristics:

Var. A1: The foreign X AG holds 20% of the share capital of Munot Holding AG

Var. A2: The confirmed CER of Munot Holding AG qualifies as "Foreign CER".

Question

Tax consequences for withholding tax / income tax?

Variant B

Munot Holding AG, headquartered in Schaffhausen, is listed on the Swiss stock exchange. In spring 2021, the company decides to spin off its "Water" division (consisting of various holdings) (double operating requirement fulfilled). This is done by means of a contribution of the "Water" Division to Wasser AG with subsequent distribution of the shares of Wasser AG to the existing shareholders; each shareholder receives one share of Wasser AG for each share of Munot Holding AG.

Question

Tax consequences for withholding tax / income tax, taking into account the following balance sheets / posting variants?

Update variant B1

Update variant B2

Variant C

Munot Holding AG, headquartered in Schaffhausen, is listed on the Swiss stock exchange. In June 2021, the General Meeting of Shareholders decides on a direct partial liquidation of 10%. This is charged to the other reserves and the pro rata nominal value. The shares to be cancelled will be tendered for a total of 800. The company's equity as at the end of 2020 is shown in the following picture:

Question

Tax consequences for withholding tax / income tax?