Case studies on the basics of restructuring law, especially with regard to tax submission 17

Case 1: Change of status - mixed company

1.1. facts of the case

In 2015, X AG moved its headquarters from abroad to the canton of Zug. When the company moved in 2015, X AG had the following balance sheet items (in million CHF):

Even after moving to Switzerland, the company's business activities are still predominantly international, and X AG fulfils the requirements for taxation as a mixed company in accordance with § 69 Para. 2 StG ZG from the time of moving in.

In 2018, the balance sheet and income statement of X AG are as follows (in TCHF):

1.2 Questions

In view of the Federal Law on Tax Reform and AHV Financing ("STAF") and the expected loss of the status as a joint enterprise, X AG intends to uncover hidden reserves as far as possible. All fixed assets are considered to be related to foreign countries.

1. Under what conditions can hidden reserves be disclosed in a tax-neutral manner under current law? Which hidden reserves are covered by a step-up?
2. How are hidden reserves to be treated under the new law if they were not disclosed before the STAF legislation entered into force?
3. How is the possibility of a tax-neutral disclosure of the relevant hidden reserves to be assessed in view of a possible merger of X AG with its subsidiary Y AG, also domiciled in Switzerland (downstream merger)?

Case 2: Immigration from abroad

2.1. facts of the case

A Holding SA, with its statutory seat in Luxembourg, intends to transfer its registered office to Switzerland in 2019 without civil law liquidation and refoundation. Upon the transfer of the registered office, the company becomes subject to unlimited tax liability in Switzerland.

The assets of A Holding SA include patents for technical processes, which are reported in the balance sheet well below their substantial fair value.

variant:

A Holding Ltd. has its registered office in Bermuda and intends to relocate to Switzerland.

2.2 Questions

What possibilities does A Holding SA have to uncover hidden reserves when immigrating to Switzerland?

variant:

What possibilities does A Holding Ltd. have for the disclosure of hidden reserves in the context of the planned relocation of its registered office?

Case 3: Restructuring of real estate within the group

3.1. facts of the case

I AG, which is based in Berne, holds a developed property in Gstaad/BE. In December 2013, the S Foundation acquires all shares in I AG from Mr I at a purchase price of CHF 8 million. In March 2015, the S Foundation purchases the property in Gstaad from I AG as part of a transfer of assets.

Time schedule regarding the purchase of the property by the S. Foundation

• 5 March 2015: Land register application
• Civil law ownership of property in Gstaad is transferred from I AG to Stiftung S
• May 20, 2015: Assessment order of the land registry office Oberland for payment of the property transfer tax
• 22 June 2015: Appeal by Foundation S against investment decision Balance sheet of I AG as at 31.12.2012 (in TCHF):

Acquisition of the shares in I AG by Mr I in 1992; derivation of the investment costs:

3.2 Question

How is this situation to be assessed from the perspective of the Bernese property transfer tax and the Bernese real estate profit tax?

Case 4: Loss of status as principal company

4.1. facts of the case

P AG has its registered office in Zurich; it holds 100% of the shares in three foreign subsidiaries.

The activities of P AG include the development of marketing strategies, production and sales planning, research & development, treasury and finance as well as administration.

The subsidiaries in turn produce and distribute the products in their own name but for the account of P AG (commissionaire model).

At the level of direct federal tax, P AG has qualified as a principal company since 2017. In the case of state and municipal taxes, taxation takes place as a mixed company.

4.2 Questions

How is the profit of the P AG taxed at federal level,

• in fiscal 2019?
• from the 2020 financial year?

Case 5: Restructuring in connection with the US tax reform ('BEAT')

5.1. facts of the case

G Inc, the US subsidiary of a large US group, will generate sales of USD 600 million in 2019. It will record management and selling expenses of USD 90 million and cost of goods sold of USD 250 million to foreign affiliates. In addition, it pays USD 110 million in intercompany royalties and USD 50 million in insurance premiums to an intercompany insurance company domiciled in Switzerland.

Key figures G Inc. (2019)

5.2 Questions

1. What are the tax consequences for the US group company G Inc. due to the new BEAT introduced with the US tax reform?
2. What, if any, are the possibilities for the US group to reduce the adverse tax consequences resulting from the BEAT?