SWITZERLAND Law and Practice Contributed by: Francis Nordmann, Johannes Bürgi, Christian Eichenberger and André Kuhn, Walder Wyss Ltd
and land registry fees may be lower in a share deal than in an asset deal. The buyer is liable for the payment of real estate transfer tax in most of the cantons that have it. However, in a few cantons the seller is liable, or there is a 50:50 split between the seller and the buyer. In a corporate restructuring, an exemp - tion from the transfer tax may be available and in some cantons the notary and/or land registry fees are reduced and the tax should not hinder corporate restructurings. This also applies to real estate companies or a group of real estate com - panies contemplating an internal group restruc - turing. Real estate transfer taxes and notary and land registry fees are charged without regard to whether the seller is realising a gain or a loss. In most of the cantons, payment of the tax (or even payment of notary and/or land registry fees) is secured by a first-ranking legal lien on the prop - erty sold, and the seller and the buyer are often jointly liable for payment of the tax (or even pay - ment of notary and/or land registry fees). There - fore, well-advised parties to a property sale and banks providing mortgage-secured funding to the buyer will take care to ensure that all taxes triggered – and all notary and land registry fees incurred – are paid in advance or put in escrow by the relevant party. 8.2 Mitigation of Tax Liability The pros and cons of an asset versus a share deal for the acquisition of a property portfolio need to be considered carefully. Beside the implications on the corporate income and/or real estate capital gains tax, transfer taxes and notary and land registry fees also need to be taken into account. The outcome of such analy - sis may vary depending on the location of the properties sold. Furthermore, the set-off of gains and losses, the extraction of future profits, secu - rity deposits for Swiss taxes (in particular VAT)
to be made by foreign companies and approval requirements for a future exit by the competent Swiss tax authorities need to be carefully con - sidered. In a share deal, a debt pushdown into the tar - get is hardly possible and, as limitations on upstream securities apply, the structure chosen needs to be discussed with the bank; savings made with respect to notary and land regis - try fees may be lost due to less advantageous funding conditions by the banks or the loss of tax-efficient interest deductions and/or acqui - sition costs. Case-by-case analysis should be performed, and the location of the underlying properties has a crucial impact on the outcome of such analysis. While a share deal does not trigger VAT, an asset deal might. However, if a portfolio of assets is sold, in general the notification procedure should be open, so there should be no cash leakage due to a time-consuming payment and refund procedure. 8.3 Municipal Taxes Some cantons and/or municipalities levy spe - cial taxes on the value of the real estate located in their territory. These have to be paid by the property owner. Moreover, rental income is subject to federal, cantonal and municipal income tax in the can - ton/municipality where the property is located. While the federal corporate income tax rate is uniform in the whole country, the cantonal and municipal income tax rates may vary widely. 8.4 Income Tax Withholding for Foreign Investors Generally, rental income from investments in Swiss properties earned by corporate investors
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