Real estate companies and collective investment schemes with direct or indirect real estate holdings, including effects on unit holders (in particular economic change of ownership)

Case 1: Real estate company vs. operating company

1. facts of the case

A holds all shares in Hotel AG as private assets for tax purposes. The AG operates a hotel in its own property. A sells its shares to B.

Questions

What real estate gains and transfer tax consequences arise in the following constellations:

• Question a): At the time of the sale, the hotel business is active. Purchaser B continues to operate the hotel in Hotel AG.
• Question b): At the time of the sale, the hotel operation is active. The purchase price consists of a property component of CHF 4 million and a component for the hotel operation of CHF 1 million. Purchaser B tries to continue the hotel operation using various concepts, but has to discontinue it two years later due to poor business performance, inter alia, due to the Corona Lockdown. The property is to be used differently in the future, whereby a conversion into an office building would also be possible.
• Question c): At the time of the sale, the hotel business is active. Immediately after the purchase of the Hotel AG, the buyer B sells the hotel business on to C for 1 million (additional information: the property has a market value of 4 million), whereby B and C (or their AGs) conclude a lease agreement with each other. The Hotel AG thus becomes the Immo AG with a corresponding change of purpose.
• Question d): At the time of the sale, the hotel business is basically still active, but due to an accident of the managing director (at the same time shareholder A), 2 months of business vacations have already occurred. Due to health problems, A is forced to sell his beloved hotel quickly. The buyer B, who has known the hotel for years and often visited it herself when she was a child, does not yet have any clear plans as to whether and for how long the hotel operation should be continued, although this is what A would like for the hotel AG.
• Question e): At the time of the sale, the hotel business is active. However, the buyer B discontinues the hotel business within three months and at the same time submits a building application for a new office building. The purchase price bid was based on a property valuation, whereby, from the buyer's point of view, no additional value was attributed to the business and the hotel inventory.
• Question f): The Hotel AG has been in existence since 1932 and has owned the property since then. Shortly before the sale, the hotel business is discontinued. Buyer B does not yet have any clear plans as to how the property is to be used in the future, but insists on taking over all the furniture. Currently, the focus is on a "Hotel Version Light" (the short-term rental of furnished apartments with concierge and weekly cleaning service). According to the most recent balance sheet, the residual book value of the property accounts for 60% of the total assets (or 95% if the market value is taken into account).

Case 2: Direct and indirect sale of a real estate company

1. basic facts

Immo AG, Zurich, holds four properties in its balance sheet. The properties are located in the cantons of Baselland, Bern, Geneva and Solothurn, which are leased to independent third parties. Immo AG is 100% owned by HoldCo. HoldCo is in turn 100% held by TopCo. TopCo is held by a natural person.

Questions

• The HoldCo sells Immo AG. What are the consequences with regard to real estate gains and transfer taxes?
• What tax consequences does the sale of Immo AG by a natural person trigger with regard to the property in the Canton of Geneva and what measures are to be ensured at the level of Immo AG?
• TopCo sells the HoldCo. What are the consequences with regard to real estate gains tax, transfer tax and profit tax for the properties in the cantons of Baselland, Bern, Geneva and Solothurn?

2nd alternative: Mixed "real estate holding company

HoldCo holds all shares in Immo AG. In addition, the balance sheet of HoldCo includes a property located in Baselland.

Question

• TopCo sells the HoldCo. What consequences does this have with regard to real estate gains tax, real estate transfer tax and profit tax compared to the initial situation for the properties in the canton of Baselland?

Case 3: Disposal of minority interests

1. facts of the case

A, B, C and D hold minority interests in Immo AG as private assets for tax purposes. Immo AG holds real estate in the cantons of Baselland, Geneva and Zurich.

Questions

• Question a): A sells its shares to C. What property gains tax consequences does this trigger?
• Question b): A , B and C sell their shares simultaneously to D. What real estate gains tax consequences does this trigger?
• Question c): D buys the shares of B. Two years later D buys the shares of A and four more years later those of C. What real estate gains tax consequences does this trigger?
• Question d): E contacts the board of directors of Immo AG and makes an attractive but time-limited offer to buy Immo AG without the shareholders having any plans to sell. The board of directors informs shareholders A, B, C and D, who are at odds with each other and do not communicate with each other or only in an emergency. The Board of Directors does not make any further in-depth clarifications and only informs E of the agreement of the individual shareholders. The purchase takes place. What property gains tax consequences does this trigger?
• Question e): C and D want to sell part of their shares to A and B within the family. In a first step, they reduce their shares by half. A offers more than B, buys 14% each and thus now holds 50%. Four years later, C and D decide to sell the remaining shares to the highest bidder. A buys the remaining shares and now holds 78%, B remains a minority shareholder with 22%, unfortunately he could not keep up with A's bid, although she absolutely wanted to acquire the shares for the purpose of a balanced share ratio. What property gains tax consequences does this trigger?

Case 4: Investment costs after a sale of the shares in Immo AG under the DTA CH LUX

1. facts of the case

TopCo, domiciled in Luxembourg, holds all shares in Immo AG, Berne. Immo AG is the owner of two properties located in the canton of Berne. The properties were all acquired by Immo AG in a taxable transaction in 2010.

TopCo is a company with sufficient substance in Luxembourg for Swiss real estate gains tax purposes.

Now the following transactions are contemplated:

• Step 1: TopCo sells all shares in Immo AG to BidCo with tax residence in Switzerland. The relevant values for real estate gains tax purposes are as follows:

• Step 2a: BidCo resells the shares in Immo AG to a third party
• Step 2b (Alternative A): Immo AG sells the properties to a third party in an asset deal.
• Step 2c (Alternative B): Immo AG is merged with BidCo in a tax-neutral manner (subsidiary absorption) and the properties are subsequently sold by BidCo in an asset deal.

The values relevant for property gains taxes in steps 2a, 2b and 2c are as follows:

Questions

• How is Step 1 treated from the perspective of Berne property gains taxes?
• How large are gains from steps 2a, 2b, and 2c relevant for Bern real estate gains taxes.

Case 5: The new practice of the City of Zurich in international constellations (DBA CH DE)

1. facts of the case

TopCo, based in Germany, holds all shares in Immo AG, Zurich. Immo AG is the owner of a property located in the city of Zurich. The property was acquired by Immo AG in a taxable transaction in 2010. The investment costs amount to MCHF 50 and the current fair value of the land is MCHF 100.

TopCo is an operating company with sufficient substance in Germany for the purposes of Swiss real estate gains taxes.

Question

Is real estate gains tax levied in the Canton of Zurich and on which capital gains?

Case 6: Transfer of the majority of shares in a collective investment scheme

1. facts of the case

The Swiss investors in a contractual investment fund ("Fund") with direct real estate holdings jointly sell the majority of the shares to the acquirer.

This constellation is likely to become more important, especially with the introduction of the L-QIF (Limited Qualified Investor Fund).

Questions

• Does the transfer constitute an economic change of ownership that can lead to real estate gains or transfer taxes? Who would constitute the tax subject.
• Will anything change if the majority in the fund management company is sold?
• Does anything change with respect to real estate gains and transfer taxes if the property is indirect (held through a real estate company).

Case 7: Transfer of a real estate company by a collective investment scheme with indirect real estate ownership

1. facts of the case

The contractual collective investment scheme ("Fund") holds its real estate in Switzerland indirectly through an "Immo AG". The investors are institutional investors. Now the shares in Immo AG are sold to the purchaser.

Question

• What are the consequences for real estate gains and transfer tax at the level of the fund, investor and fund management company (subject to the corresponding cantonal/municipal legal basis)? Is it only necessary to address the property as a possible tax subject?

Case 8: Change of fund management company in a collective investment scheme

1. facts of the case

A collective investment scheme (contractual investment fund) holds real estate in the cantons of Fribourg, Geneva and Vaud. The fund is managed by the fund management A.

Question

• Fund management company A transfers the management of the fund to fund management company B, which is an independent third party. What are the consequences with regard to real estate transfer tax?