SWITZERLAND Law and Practice Contributed by: Marco Toni, Gilles Pitschen and Leonard Baumann, Loyens & Loeff
It should always be considered whether the gen- eral rules for tax avoidance may be applicable to the case at hand. Generally, tax avoidance would be assumed where a legal arrangement chosen by the parties involved appears to be unusual (“ insolite ”), improper or outlandish – or, in any case, completely inappropriate to the eco- nomic circumstances (“objective element”) – if, in addition: • it can be assumed that the chosen legal arrangement was made abusively merely in order to save taxes that would be due if the appropriate circumstances were in place (“intention to avoid”; “subjective element”); and • the chosen course of action would actually lead to a significant tax savings, if accepted by the tax authority (“effective element”). Particular attention should be paid to the transfer of tax losses carryforward as part of the spin- off and subsequently the transfer of such tax losses carried forward and the offset with tax- able profit of the acquiring business. In general, the offset of tax losses carryforward is possible to the extent that the business will be taken over and continued and that the structure would not be considered as tax avoidance. For complete- ness purposes, however, it should be noted that a contribution of a business followed by an upstream merger could trigger adverse Swiss tax consequences. 5.4 Timing and Tax Authority Ruling The timing of a spin-off usually depends on the preparation of the transaction from tax and legal perspectives as well as from an operational perspective. From a legal perspective, a spin-off may be structured in different ways, including via:
• a direct business transfer by means of an asset deal (“singular succession”) or as a bulk transfer pursuant to the Swiss Merger Act (“universal succession”); • a two-step demerger (transferring the busi- ness to a newly incorporated subsidiary (“newco”) and selling the shares in the newco to the buyer); or • a statutory demerger. In the case of a transfer of a business with employees, the employer has certain information obligations and – if measures apply that affect the employees – a consultation procedure must be implemented. Although no specific waiting period applies for the employees’ information and consultation, it is usually recommended to inform and consult the employees at least one month prior to the effective date of the spin-off. From a tax perspective, it is best practice to file advance tax rulings with: • the competent cantonal tax authority for corporate income tax and annual capital tax purposes – ie, the cantonal tax authority responsible for the assessment of corporate income tax and annual capital tax of the com- pany; and • the Swiss Federal Tax Administration for the purposes of Swiss withholding tax and stamp duties (usually levy and refund). It is imperative that the tax rulings are filed prior to the implementation of the spin-off, as a confir- mation will only be granted for transactions that have not yet occurred. Depending on the com- plexity of the spin-off, a confirmation can usually be obtained between three and six weeks after filing from the Swiss Federal Tax Administration and usually between three and 12 weeks after filing from the cantonal tax authorities – although
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