SWITZERLAND Law and Practice Contributed by: Beda Kaufmann, Alexander von Jeinsen, Daniel Raun and Laurent Riedweg, Advestra
least 10% of the share capital of another company or the rights to at least 10% of the profits and reserves or those that have a fair market value of at least CHF1 million. The participation relief also applies on capital gains from a disposal of a qualifying participation of at least 10% that was held for at least one year. With the participation relief, the corporate income tax liability is reduced by the ratio between the net participation income (including administrative and financing costs) and the total taxable income (resulting in a virtual tax exemption for such dividends and capital gains). A similar participation deduction regime exists for Swiss partnerships or their taxable partners, respectively (with a 10% participation threshold and reduced taxa - tion of the dividend income). Tax Loss Carryforwards Tax losses can be carried forward for seven years and can be used against any taxable income. Unlike other jurisdictions, there is no forfeiture of tax losses in the event of a change of ownership. Immigration Step-Up Swiss tax law allows a step-up of hidden reserves (including goodwill) upon immigration of a foreign company to Switzerland, with later tax-effective depreciation over a period of ten years. Other Special Incentives Further tax-planning measures such as a cantonal R&D super-deduction and “Patent Box” are available. Tax Rulings Tax rulings allow for an efficient way to discuss planned structures and transactions with competent tax authorities in advance and obtain legal certainty on the pertinent tax consequences. Tax rulings are commonly used in Switzerland and can be particularly valuable in the context of reorganisations, restructur - ings and cross-border structures and investments. 9.4 Tax on Sale or Other Dispositions of FDI Capital gains of a foreign investor on the disposi - tion of shares of a Swiss corporation or other Swiss assets are generally not subject to Swiss tax, unless the shares or assets are attributable to a permanent establishment or fixed place of business in Switzer - land. In addition, certain cantons levy real estate capi -
tal gains tax on the disposition of real estate or shares of a real estate company. As discussed in 9.1 Taxation of Business Activities , the income of a Swiss partnership is attributed and taxed at the level of the partners. Foreign investors in a Swiss partnership with a Swiss business operation generally become subject to Swiss taxation on their interest in the Swiss partnership and are taxed on the disposition of their Swiss partnership interest (subject to applicable double taxation treaties). 9.5 Anti-Evasion Regimes There are no statutory anti-avoidance rules in Swiss law. However, the Federal Supreme Court has estab - lished a general anti-avoidance rule applicable to all Swiss taxes. In accordance with this case law, tax authorities have the right to tax the taxpayer’s struc - ture or transaction based on its economic substance and the right to disregard arrangements or legal struc - ture if the structure or transaction of the taxpayer is unusual or inappropriate and it was chosen with the intention to achieve tax savings and would result in tax savings if permitted. Furthermore, Switzerland generally adheres to the arm’s-length principle and applies the OECD transfer pricing guidelines. 10. Employment and Labour 10.1 Employment and Labour Framework Employment relationships in Switzerland are gov - erned by: • the Swiss Code of Obligations; • the Federal Act on Work in Industry, Trade and Commerce (the “Labour Act”) and its regulations; • collective bargaining agreements (if any); and • the terms agreed between the parties to an employment agreement. Additional legislations may provide for specific rights or obligations – for example, the Federal Act on Infor - mation and Participation of Employees in Undertak - ings, the Federal Act on Gender Equality, the Federal Act on Data Protection, and the Merger Act.
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