News on the taxation of corporate restructuring (2024)

Case 1: Restructuring and hidden capital contributions

1. facts of the case

In 2015, X. sells to the X. AG (AK: CHF 100,000) from his private assets for CHF 100,000, a classic car with a market value of CHF 1 million. AG, it is recognized at CHF 100,000.

In 2024, X. AG is liquidated. The only asset is the classic car. At this time, it has a value of CHF 2 million (variant: CHF 500,000).

The liquidation balance sheet of X. AG is as follows (in TCHF):

Questions

• Is income and withholding tax due on the liquidation dividend?
• Would the assessment change if no emissions tax was paid in 2015?

2. variant 1: Sale of X. AG to Y.

As in the original case. X. has sold X. AG to Y. in 2020, however.

Question

• Does this change anything in the assessment?

3. variant 2: Sale of the classic car before liquidation

As in the original case. X. AG already sold the classic car in 2022 for CHF 1.5 million (variant: CHF 900,000) and reinvested the proceeds in shares, which have a value of CHF 2 million (variant: CHF 1.5 million) upon liquidation in 2024.

4. variant 3: distribution of the classic car

As in the original case. However, X. AG is not liquidated, but only the classic car (value: CHF 2 million) is distributed as a dividend in kind.

5. variant 4: Indirect subsidy

As in the original facts. X. does not sell the classic car to X. AG, but to Y. AG (a subsidiary of X. AG).

In 2024, both X. AG and Y. AG will be liquidated.

6. variant 5: old-law demerger

X. AG operates a business A and a business B. As part of an old-law (two-step) demerger within the meaning of Art. 61 para. 1 lit. b DBG, X. AG transfers business B. (market value: CHF 10 million) to Y. AG in 2015 at a book value of CHF 1 million and distributes the shares of Y. AG to X.

Y. AG is subsequently sold to Z. In 2024, Y. AG is liquidated and Z. receives a liquidation dividend of CHF 5 million.

Question

• Can Z. invoke Art. 20 para. 3 DBG with regard to the hidden reserves transferred to Y. AG in the context of this demerger?

7. variant 6: spin-off

X. AG transfers an operational asset at a book value of CHF 1 million (market value: CHF 4 million) to the subsidiary Y. AG and asserts the restructuring facts of Art. 61 para. 1 lit. d DBG (spin-off).

In 2022, X. AG sells Y. AG to Z.

Y. AG will be liquidated in 2024.

Question

• Can Z. invoke Art. 20 para. 3 DBG to the extent of the hidden capital contribution of CHF 3 million?

8. variant 7: Conversion of a partnership into a corporation

In 2015, X. converts its trading business (book value: CHF 1 million; market value: CHF 5 million) pursuant to Art. 19 para. 1 lit. b DBG into X. AG corporation.

In 2022, X. sells X. AG to Z.

In 2024, X. AG is liquidated.

Question

• Can Z. invoke Art. 20 para. 3 DBG?

Case 2: Conversion of a real estate business

1. facts of the case

X. has held several houses with rental apartments in the canton of Bern as private assets for many years. In the 2023 tax period, he declares these as business assets for the first time.

In 2024, he transfers the properties to X. AG. The properties meet the qualitative and quantitative requirements for real estate operations.

Question

• Can X. invoke Art. 12 para. 4 lit. a StHG with regard to real estate gains tax?

Case 3: Tennis club

1. facts of the case

The purpose of the taxable association "Tennis Club" (TC) is to maintain and promote the sport of tennis. It operates the clubhouse for club members and also runs a public restaurant there. It also manages the tennis facility with tennis courts and the associated facilities. Both the property with the clubhouse and the separate plot of land with the tennis facility are owned by the club.

The balance sheet of the TC Association is as follows (in CHF thousand):

The TC association intends to legally and economically separate its operational activities from the association. It would like to spin off the operational business, the management of the restaurant and the operation of the tennis facility, into a public limited company, Tennisclub AG (T. AG). In addition to the operating activities, all properties are also to be transferred.

As part of the spin-off, the public sector will acquire a 10% stake in T. AG via the regional tourism association (taxable association) and small private shareholders (private assets). The public sector will subscribe to shares because the tennis club is obliged to make the tennis facility accessible to the public (especially for tourists). This obligation is secured in the land register by a personal easement and is supported by the municipality with annual contributions.

The TC association will no longer carry out any operational activities in future. It will limit itself to supporting its members in the maintenance and promotion of tennis and will focus on providing non-material and financial support for its operations.

In addition to the following transferred assets (carrying amounts) of the association TC

• Current assets TCHF 100
• Clubhouse/restaurant TCHF 1,500
• Tennis facility TCHF 500
• Borrowed capital TCHF 1'400

TCHF 350 will be contributed by the new shareholders. The TC Association holds 80 % of the share capital (TCHF 560), while the remaining shareholders hold shares with a nominal value of TCHF 140.

The target structure is as follows:

Questions

• Can the business and the land be spun off to T. AG at book value in a tax-neutral manner in accordance with DBG/StHG?
• Does the new formation of T. AG result in an issue tax?
• Variant: What are the tax consequences for direct federal tax if all shares in T. AG are sold to an independent third party after three years at a market value of CHF 1,900,000?

1. factual variant I

The business and the properties are held by T. AG. For the shareholder structure, reference can be made to the target structure in the previous facts.

The clubhouse and restaurant need to be renovated. This will require a large amount of investment. The small shareholders and the public authorities are not prepared to provide additional equity or collateral. However, they have given their consent for the clubhouse and restaurant to be transferred to the TC association at book value, while the tennis facility remains with T. AG. In return, their shareholding in T. AG will be increased by 2% each. The renovation can be financed with contributions from club members and bank financing.

The target structure is as follows:

The balance sheet of T. AG is as follows (in TCHF):

Questions

• Can the restaurant business and the land with the clubhouse/restaurant be sold to the TC association at book value in a tax-neutral manner in accordance with the DBG?
• What are the tax consequences of this transfer and the change in the shareholding ratios for the small shareholders and the tourism association?
• Variant: In contrast to the basic situation, the TC association is the sole shareholder of T. AG. T. AG is to be merged into Verein TC (at book value). Is this merger possible on a tax-neutral basis under the DBG?

Case 4: Mother absorption

1. facts of the case

M.S. holds 100% of the shares in C. Holding AG as private assets. C. Holding AG owns 100% of C. SA.

The balance sheet of C. Holding AG is as follows (in TCHF):

A parent absorption is planned. To simplify the structure, C. Holding AG is to be merged into C. SA as at 31 December 2023 by means of a reverse merger and the merger loss capitalized.

Questions

• What are the tax consequences for the shareholder M.S.?
• Option 1: On August 28, 2023, C. SA increased its share capital by TCHF 50 to TCHF 150 at the expense of retained earnings.
• Option 2: On February 23, 2024, C. SA increased its share capital by TCHF 50 to TCHF 150 at the expense of retained earnings.
• Option 3: C. SA has KER of TCHF 2,900 instead of retained earnings and annual profit. C. SA does not increase its share capital.
• Option 4: In contrast to the facts of the case, C. Holding AG has current assets of CHF 1,000,000, liabilities of CHF 100,000 and retained earnings of CHF 8,145,000. The merger date is set at June 30, 2023, the date on which C. Holding AG prepared its financial statements. How is the taxable capital of C. SA calculated for the period of its financial year from January 1 to December 31, 2023?