Investments in securities, structured products, collective investment schemes, etc.

Case 1: Convertible Loan

1. facts of the case

The domestic X. AG (start-up) receives non-interest-bearing convertible loans of CHF 1 million each from 21 investors. At the end of the 18-month term, these are automatically converted into newly created shares in X. AG, whereby a discount of 25% is granted compared to the price of the last financing round.

Questions

• What tax consequences are associated with the conversion (the investors each receive shares with a value of CHF 1.33 million)?
• How should the case be assessed if an investor sells the loan for CHF 1.1 million after 6 months?

2nd variant: Conversion discount of 20%

• How would the case be assessed if the conversion discount were only 20%?

Case 2: Reverse convertibles

1. facts of the case

Bank X., which is domiciled in Germany, issues the following product:

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: SMI

Fixed coupon: 7% p.a. (payable annually)

Knock-in event: SMI falls below 80% of the value at the time of issue

Return amount: Scenario 1: No knock-in event: CHF 1,000

                           Scenario 2: Knock-in event occurred: CHF 1,000 x (SMIF/SMII)

                           "SMIF" is the SMI price at the end of the term

                           "SMII" is the SMI price at the time of issue

Question

• How should the product be treated in terms of withholding tax, income tax and sales tax?

2. variant 1

• What differences would have to be taken into account if the due date were July 11, 2025?

Issuer: X. AG

Issue date: July 12, 2024

Maturity: July 14, 2025

Issue price: CHF 1,000

Reference Asset: SMI

Fixed coupon: 7% p.a. (once at the end of the term)

Knock-in event: SMI falls below 85% of the value at the time of issue

Return amount: Scenario 1: No knock-in event: CHF 1,000

                           Scenario 2: Knock-in event occurred: CHF 1,000 x (SMIF/SMII)

                           "SMIF" is the SMI price at the end of the term

                           "SMII" is the SMI price at the time of issue

3. variant 2

• What differences would have to be taken into account if the knock-in event were 50%?

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: SMI

Fixed coupon: CHF 2% p.a. (payable annually)

Knock-in event: SMI falls below 50% of the value at the time of issue

Volatility SMI 2y: 20%

Return amount: Scenario 1: No knock-in event: USD 1,000

                           Scenario 2: Knock-in event occurred: CHF 1,000 x (SMIF/SMII)

                           "SMIF" is the SMI price at the end of the term

                           "SMII" is the SMI price at the time of issue

4. variant 3

• What differences would have to be considered if the underlying were a corporate bond (with a single B rating)?

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: 5y-Bond of Y. AG (Y-Bond)

Fixed coupon: 7% p.a. (payable annually)

Knock-in event: Y-bond falls below 90% of the value at the time of issue

Return amount: Scenario 1: No knock-in event: CHF 1,000

                           Scenario 2: Knock-in event occurred: CHF 1,000 x (YBondF/YBondI)

                           "YBondF" is the price of the Y-bond at the end of the term

                           "YBondI" is the price of the Y-Bond at the time of issue

5. variant 4

• What differences would have to be taken into account if the underlying were a mixed basket containing 3 SMI shares and two corporate bonds (both with a single A rating)?

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: 20% NESN; 20% UBSG; 20% NOVN; 20% ABB23/26;
20% GEBERIT19/28

Fixed coupon: 7% p.a. (payable annually)

Knock-in event: At least one underlying falls below 80% of the value at the time of issue

Return amount: Scenario 1: No knock-in event: CHF 1,000

Scenario 2: Knock-in event occurred: CHF 1,000 x (RAF/RAI)

                           "RAF" is the price of the reference assets at the end of the term

                           "RAI" is the price of the Reference Assets at the time of issue

6. variant 5

What differences would have to be taken into account if the underlying were a mixed basket containing 4 SMI shares and a corporate bond (with a BBB rating)?

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: 20% NESN; 20% UBSG; 20% NOVN; 20% ROG; 20% GEORGFISCHER18/28

Fixed coupon: 7% p.a. (payable annually)

Knock-in event: At least one underlying falls below 80% of the value at the time of issue

Return amount: Scenario 1: No knock-in event: CHF 1,000

Scenario 2: Knock-in event occurred: CHF 1,000 x (RAF/RAI)

                           "RAF" is the price of the reference assets at the end of the term

                           "RAI" is the price of the Reference Assets at the time of issue

Case 3: Future

1. facts of the case

Bank X., which is domiciled in Germany, issues the following product:

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Underlying: Novartis shares (NOVN)

Issue price: CHF 30 (variant: CHF 25)

Exercise price: CHF 70 NOVNI CHF 100

                           "NOVNI" is the Novartis share price on 9.7.2024

2Y-Swap rate: 0.9%

Redemption amount: NOVNF - Exercise price

                           "NOVNF" is the Novartis share price at the end of the term

Question

• How should the product be treated in terms of withholding tax, income tax and sales tax?

Case 4: Basque certificate

1. facts of the case

Bank X., which is domiciled in Germany, issues the following product. The underlying consists of five SMI shares.

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: 20% NESN; 20% UBSG; 20% NOVN; 20% ROG; 20% GF

Investment: The dividends are reinvested in the underlying securities.

Return amount: CHF 1,000 x (RAF/RAI)

                           "RAF" is the price of the RA at the end of the term

                           "RAI" is the price of the RA at the time of issue

Question

• How should the product be treated in terms of withholding tax, income tax and sales tax?

2. variant 1

• What differences would have to be taken into account if the underlying consisted of only 4 SMI shares?

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: 25% NESN; 25% UBSG; 25% NOVN; 25% ROG

Investment: The dividends are reinvested in the underlying securities.

Return amount: CHF 1,000 x (RAF/RAI)

                           "RAF" is the price of the RA at the end of the term

                           "RAI" is the price of the RA at the time of issue

3. variant 2

• What differences would have to be taken into account if the underlying were made up of 2 commodities?

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: 50% copper; 50% palladium

Return amount: CHF 1,000 x (RAF/RAI)

                           "RAF" is the price of the RA at the end of the term

                           "RAI" is the price of the RA at the time of issue

Case 5: Capital-protected product

1. facts of the case

Bank X., which is domiciled in Germany, issues the following product.

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Issue price: CHF 1,000

Reference Asset: 20% NESN; 20% UBSG; 20% NOVN; 20% ROG; 20% GF

Capital protection: 50%

Return amount: MAX(CHF 500; 90% x CHF 1,000 x (RAF/RAI))

                           "RAF" is the price of the RA at the end of the term

                           "RAI" is the price of the RA at the time of issue

Market interest rate: CHF 2y swap rate (July 9, 2024): 0.93%.

The issuing bank X has a single A rating

Question

• How should the product be treated in terms of withholding tax, income tax and sales tax?

Case 6: Certificate on crypto asset

1. facts of the case

Bank X., which is domiciled in Germany, issues the following product:

Issuer: X. AG

Issue date: July 9, 2024

Maturity: July 9, 2026

Underlying: Ethereum (ETH)

Investment: Half of the ETH coins are delegated to a staking pool. The other half is transferred to a liquidity pool. The staking and liquidity rewards generated are reinvested in ETH.

Issue price: CHF 1,000

Return amount: CHF 1,000 * (ETHI / ETHF)

                           "ETHI" is the ETH exchange rate at the beginning of the term (i.e. CHF 1,000)

                           "ETHF" is the price of ETH at the end of the term

Case 7: AT1 bonds

1. facts of the case

X. Bank is issuing a bond on July 9, 2024 with a debt waiver within the meaning of Art. 11 et seq. BankA (write-down bond), which qualifies as additional tier 1 capital (AT1) for regulatory purposes.

If the core capital of X. Bank falls below 7% (so-called CET1 ratio), the bond is written off (so-called High Trigger AT 1). The bond has a perpetual term (perpetual instrument).

The terms of the bond are as follows:

Issuer: X. AG

Issue date: July 9, 2024

Currency: CHF

Interest rate: 4%

Maturity: None (perpetual)

First Call Date: July 9, 2030

The following factors are also known:

6y CHF swap rate (at the time of issue): 0.95%

Spread for a bond without a write-down component with a term of 6 years at the time of issue: 1.3%

Question

• How is the coupon to be treated for withholding tax and income tax purposes?

Case 8: Bail-in bonds

1. facts of the case

The (globally systemically important) X. Bank issues a so-called bail-in bond on July 9, 2024, which can be written off (in whole or in part) by FINMA under certain conditions. The bond can be counted towards the so-called Total Loss Absorbing Capital (TLAC) of X. Bank.

The terms of the bond are as follows:

Issuer: X. AG

Issue date: July 9, 2024

Currency: EUR

Interest rate: 5%

Maturity: July 9, 2039

Question

• How is the coupon to be treated for withholding tax and income tax purposes?

Case 9: Cross-currency swap

1. facts of the case

The domestically domiciled X. Bank domiciled in Switzerland and a natural person or legal entity (client) domiciled in Switzerland or abroad conclude the following cross-currency swap with only final currency exchange (no exchange of notional amounts on conclusion and expiry):

Issuer: X. AG

Start date: July 9, 2024

End date: July 9, 2026

Nominal amounts: CHF 10,000,000 or USD 11,174,000 according to the USD/CHF spot rate on July 9, 2024

Payments: During the term, the client pays quarterly (i) CHF 3m SARON on the CHF notional amount and receives (ii) USD 3m SOFR plus 10 basis points on the USD notional amount

Expiry: The bank receives CHF 10,000,000 from the customer and pays the customer USD 11,174,000 (USD/CHF spot rate on July 9, 2024)

In addition to the cross-currency swap, the customer concludes the following currency transaction with X. AG the following currency transaction:

FX transaction: The customer buys CHF 10,00,000 from X. AG CHF 10'00'000 and pays USD 11'174'000 with value date on July 9, 2024.

Question

• Are the interest payments subject to withholding tax?

2. variant 1

The domestically domiciled X. Bank domiciled in Switzerland and a natural person or legal entity (customer) domiciled in Switzerland or abroad conclude the following cross-currency swap (exchange of notional amounts on conclusion and expiry):

Issuer: X. AG

Start date: July 9, 2024

End date: July 9, 2026

Nominal amounts: CHF 10,000,000 or USD 11,174,000 according to the USD/CHF spot rate on July 9, 2024

Closing: At closing, the customer receives CHF 10,000,000 from the bank and pays USD 11,174,000 to the bank (USD/CHF spot rate on July 9, 2024)

Payments: During the term, the client pays quarterly (i) CHF 3m SARON on the CHF notional amount and receives (ii) USD 3m SOFR plus 10 basis points on the USD notional amount

Expiry: The bank receives CHF 10,000,000 from the customer and pays the customer USD 11,174,000 (USD/CHF spot rate on July 9, 2024)