SWITZERLAND Law and Practice Contributed by: Francis Nordmann, Johannes Bürgi, Christian Eichenberger and André Kuhn, Walder Wyss Ltd
8.5 Tax Benefits A corporate investor may apply income tax- effective interest and depreciation deductions. Furthermore, the costs for maintaining the prop - erty in good shape and fit for its purpose, as well as income and capital taxes accrued and provisioned, may be deducted from the income tax base. The same is true with respect to all expenses relating to the property management and letting.
top of the federal income tax). If a long holding period applies, the real estate capital gains tax may be 20%, or even less than that in some cantons. Accordingly, whether the gain realised by a corporate investor will be subject to corpo - rate income tax or real estate capital gains tax may have quite some impact on the after-tax performance of an investment. Again, in the case of a corporate or group internal reorganisation, the tax may be deferred as it should not hinder such restructurings. Dividends (and other distributions) paid by Swiss companies are subject to a withholding tax of 35%. The withholding has to be deducted from the dividend in advance and has to be paid by the debtor of the dividend – ie, the company paying the dividend (a reporting procedure is only available in the case of a Swiss parent com - pany or a parent company in a benign double tax treaty state). For withholding tax purposes, it is therefore advantageous if the investor (a share - holder of the SPV) is domiciled in a country that has entered into a double taxation treaty with Switzerland. Unless this is the case, it is advan - tageous to use a foreign SPV to avoid withhold - ing tax.
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