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Daniel Bader

Susanne Schreiber

Current tax issues when buying and selling shares

ISIS) seminar on 23 November 2017

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1. asymmetric purchase prices

Anna Berg lives in Zollikon, ZH and has worked for several years in a management position at E. AG, based in Zurich. E. AG has been wholly owned by C. Holding AG since 2001. In 2010, C. Holding AG sold the company to an investment fund. The latter acquired 100% of the shares in E. AG through Z. Holding AG (acquisition company) at a price of CHF 4,400,000 (CHF 1,100 per share). The buyer wanted Ms Berg to also participate in the capital of E. AG. To this end, Z. Holding AG sold 200 registered shares in E. AG (5% of the share capital divided into 4,000 registered shares with a nominal value of CHF 100.00 each) to Ms. Berg at a price of CHF 220,000.00 (CHF 1,100.00 per share). Ms Berg financed the purchase price from her private funds.

3 years later, Z. Holding AG and Mrs. Berg sell their shares to N. Konzern AG with headquarters in Zug. In the purchase contract a price of CHF 9'200'000 (CHF 2'300 per share) is agreed. The division of the purchase price between the sellers was not specified in the purchase agreement. The sellers agree among themselves that Mrs Berg shall receive CHF 764,500 (instead of CHF 460,000) for her 5% shares.

Under the assumption that the gain from the sale of shares was a tax-free private capital gain, Ms Berg subsequently refrained from declaring taxable income from the sale of the 200 registered shares of E. AG for the tax year 2013. The assessment authority did not share this view and recorded the disproportionate participation in the increase in value of the shares as income from employment.

a) Do you assess the tax consequences for Anna Berg?
b) How do you see the tax consequences for Z. Holding AG?


The share capital of E. AG is divided into 2,000 ordinary shares and 2,000 preference shares, each with a nominal value of CHF 100. In the course of the acquisition by Z. Holding AG, Mrs. Berg will receive 275 ordinary shares at a price of CHF 800.00 per ordinary share. The remaining 1,725 ordinary shares and all 2,000 preference shares will be transferred to Z. Holding AG (at a price of CHF 800 per ordinary share and CHF 1,400 per preference share). Mrs. Berg acquires the 275 ordinary shares out of her private assets at a price of CHF 220,000.

Z. Holding AG, as the holder of the preferred shares, is entitled to an annual yield of 10% on the issue amount of the preferred shares, which can be retained (there is no interest or yield on the retained yields). Accordingly, any liquidation dividend will first be paid in full to the holders of the preference shares before the remaining funds are distributed among the ordinary shareholders.

3 years after the acquisition by Z. Holding AG, N. Konzern AG buys all 4'000 shares at a total price of CHF 9'200'000. Mrs Berg receives CHF 764'500.- of this amount. She does not declare the proceeds as taxable income.

c) What are the tax consequences for Anna Berg? (Calculation of purchase price for ordinary shares and preference shares)

2. reinvestment after sale and transposition

Fabio Rossi, resident in Wil, SG is the founder of Nova AG. He currently holds 60% of the shares and is active in the management and the board of directors of Nova AG. Already 3 years after the foundation of Nova AG, in 2005 Martin Schmid invested in Nova AG and received 30% of the shares in return. Since 2009 Jakob Koch has been CEO of Nova AG. When he took up his post, he acquired a 10% stake in the share capital. Both Martin Schmid and Jakob Koch are on the Board of Directors of Nova AG. The share capital of Nova AG amounts to CHF 100'000 and is divided into 10'000 registered shares (at CHF 10 per share). All shareholders hold the investments in Nova AG as private assets.

On August 5, 2015, T. Holding AG will acquire from Mr Rossi, Mr Schmid and Mr Koch all shares in Nova AG at a price of CHF 1,500,000 (CHF 150 per share). CHF 1,050,000 of the purchase price will be paid in cash. The remaining CHF 450,000 will be offset against the issue of investments in T. Holding AG (issue of shares against contribution in kind of the purchase price claim, booking of the premium as capital contribution reserves). Accordingly, Fabio Rossi holds 18%, Jakob Koch 3% and Martin Schmid 9% of T. Holding AG. The sellers will receive the shares in T. Holding AG at fair value. In addition, the parties agree that all three sellers shall continue to serve on the Board of Directors and Jakob Koch as CEO.

a) What are the tax consequences for the sellers?
b) What are the tax consequences for T. Holding AG?

3. tax consequences of privileged share acquisition / capital increase

Lars Miller has worked for years as a manager in the fashion industry. On 20 March 2014 he took over the position as CEO of Trend AG. The company has been in deficit for some time and was taken over by a private equity investor shortly before, on 10 March 2014. The owners expect Lars Miller to steer the company back into the black. In this context, he can participate in the company's success by means of shares. His salary will be fixed at CHF 250,000 per year in line with market conditions, with a bonus of max. 20% of the fixed salary.

The subscription price per share to be paid by Mr. Miller is identical to the price paid by the private equity investor on 10 March 2014. Mr. Miller acquires 11.2% of the shares (56 of the total of 500 registered shares) in Trend AG directly from the Private Equity Investor. For this purpose he will pay a price of CHF 112,000 based on the CHF 1,000,000 previously paid by the investor for 100% of the shares.

To enable a strategic reorientation of Trend AG, the owners will invest additional equity in August 2014. This will be done by a capital increase of CHF 1'000'000. For this purpose 200 new registered shares will be subscribed by the private equity investor at an issue price of CHF 5'000 per share (nominal value of CHF 1'000 / premium of CHF 4'000 per share). Lars Miller waives his subscription right and will be diluted from 11.2% to 8%.

In the 2nd quarter of the year 2017 Trend AG is back in the profit zone and the investors want to sell Trend AG. Mr. Miller also leaves the company and sells his stake at the same conditions. In total a sales price of CHF 5'600'000 will be achieved. Of this, Lars Miller will receive CHF 448,000. He will also receive a special bonus of CHF 50,000 in cash.

What are the tax consequences for Lars Miller at the time

a) the purchase of the shares,
b) the capital increase and
c) the exit?

4. sale of options

Prof. Grob was asked by friends to work as a consultant for a MedTech company (Med-Tech AG) in the start-up phase. He agreed to sit on the board of directors in order to contribute to the "strategic sounding". He did not subscribe to any shares and was not allocated any shares.

Immediately upon foundation, he was assured in writing that he would be able to acquire 100 shares at par (call option) at a later date (max. 5 years). He paid CHF 50,000 for this and declared it in his securities register.

Due to personal differences, however, Prof. Grob and his colleagues went their separate ways and never exercised this right or sold the options. On the other hand, he was still "inactive" on the Board of Directors.

In 2017, the owners of Med-Tech AG will receive a purchase offer of CHF 40,000,000 for 100% of the shares (a total of 2,000 registered shares) in Med-Tech AG. However, the buyer (a US MedTech company) demanded as a prerequisite for such a purchase that the "problem" or option issue be resolved in advance with Prof. Grob.

On August 25, 2017, Prof. Grob and the current shareholders of the MedTech company agreed on a payment of CHF 1,200,000 for the sale of the options or the waiver to exercise them and the resignation from the Board of Directors.

a) What are the tax consequences for Mr Grob?


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