Bär & Karrer Ltd | Susanne Schreiber | Raoul Stocker | Cyrill Diefenbacher | Leu Martin
Global | OECD | Switzerland
This article is an extract from Lexology In-House View: Swiss M&A 2025. Click here for the full guide.
Tax framework and recent changes
General tax framework
Corporate income and capital tax
Legal entities are subject to corporate income tax on the worldwide net income (except for income from foreign real estate or allocated to foreign permanent establishments) if they are resident, that is, if they are incorporated or have place of effective management in Switzerland. In addition, Swiss corporate income tax is levied on foreign residents if there is a specific economic connection to Switzerland (eg, maintaining a permanent establishment in Switzerland). Depending on the canton and community, the effective corporate federal, cantonal and communal income tax rate on net profits before tax varies between approximately 11.2 and 22.3 per cent.
Under Swiss tax rules, tax losses can be carried forward for a period of seven years.
In addition, Swiss tax-resident legal entities are subject to a capital tax (the rate varies between cantons and communities), which is levied annually on the taxable equity.
On 1 January 2024, Switzerland implemented certain aspects of the Organisation for Economic Co-operation and Development (OECD) Minimum Tax. On the federal level Switzerland introduced the ‘Qualified Domestic Minimum Top-Up Tax’, according to which Swiss entities and branches of multinational companies in scope of the OECD Minimum Taxation (ie, having a turnover of more than €750 million per annum) will pay a top-up tax in Switzerland if their effective tax rate across Switzerland is below 15 per cent. The Income Inclusion Rule was brought into force with effects from 1 January 2025. The Undertaxed Payments Rule (UTPR) will not be implemented for the time being. The Swiss Federal Department of Finance will observe the international developments of the UTPR regarding a future implementation of this rule.1
Withholding tax
Swiss withholding tax is levied on dividends, including deemed dividends, and certain types of Swiss source interest, as well as certain insurance payments paid by Swiss insurance companies. In principle, tax at a flat rate of 35 per cent is automatically deducted by the payer (debtor system) and, if the income is properly reported by the Swiss resident beneficiary, is refunded in cash or credited against the personal income tax liability. Dividends paid out of qualifying capital contribution reserves are not subject to Swiss withholding tax and are exempt from income tax for Swiss individuals holding the shares as private assets. A tax reform, which entered into force on 1 January 2020, introduced a restriction on the capital contribution principle for Swiss listed companies, namely a 50:50 rule, according to which at least half of the distribution must be made out of taxable reserves, if any. A comparable rule applies in the case of a share buyback of Swiss listed companies for cancellation on the second trading line, where at minimum the same amount of capital contribution reserves and other reserves must be used.
For non-Swiss tax residents, the withholding tax is essentially a final burden, unless they are eligible for a partial or full refund under an applicable Swiss double tax treaty.
Stamp duties
Issuance stamp duty
The issuance of new share capital as well as any contributions into the reserves of Swiss corporations made by their direct shareholders are subject to an issuance stamp duty of 1 per cent of the net contribution received by the corporation. Contributions received from indirect shareholders are not subject to this duty. Certain transactions, for example, the first 1 million Swiss francs received as a contribution in connection with the issue of shares or shareholder contributions of up to 10 million Swiss francs received in connection with a recapitalisation, to the extent that the contribution eliminates losses in the balance sheet, are exempt.
Securities transfer tax
Transfers of taxable securities (eg, shares or bonds) for consideration and with the involvement of at least one Swiss (for the purposes of the stamp duties this also includes Liechtenstein residents) securities dealer as a party or intermediary may be subject to a securities transfer tax of 0.15 per cent (Swiss securities) or 0.3 per cent (foreign securities) on the purchase price. The tax is payable by the Swiss securities dealer, who pays half of the tax for himself and the other half for the counterparty or client who is neither a Swiss securities dealer nor an ‘exempt investor’ (exempt investors include, inter alia, Swiss and foreign investment funds, foreign regulated pension funds and life insurers, listed foreign companies and their foreign consolidated subsidiaries).
The term ‘intermediary’ is interpreted with reference to Swiss private law and includes referral/contact brokers and intermediary/negotiations brokers. The later term also includes companies that ‘causally participate in the conclusion of a securities transaction and knowingly cause or contribute to the actual success of the exchange of the concurrent declaration of intent’. Such activities include searching for suitable buyers for the clients’ companies; preparation of sales documentation; establishing contact with prospective buyers; organisation of meetings with interested parties; and assisting in the negotiation of the sales contracts. As a result, a Swiss parent company (qualifying as a securities dealer due to holding significant shareholdings or securities of minimum 10 million Swiss francs book value) of either the buyer or the seller in an M&A transaction actively involved in the transaction via its officers or internal deal team, or an M&A adviser may be viewed as an intermediary. In that respect, neither the existence of a formal contractual relationship between the involved parties nor the payment of a brokerage fee is relevant.
Income tax
All periodic and non-recurring income is generally taxable for a Swiss resident individual (worldwide income, except for foreign real estate, permanent establishments or explicit tax-exempt income). The Swiss income tax laws contain a very favourable provision that capital gains from the sale of private assets (other than Swiss real estate) are tax-free, subject to certain restrictions to prevent abuse (eg, indirect partial liquidation or transposition, qualification of the individual as commercial securities dealer, etc).
Dividends received out of qualifying capital contribution reserves are not subject to income tax. According to a recent Swiss Federal Court decision, the same treatment applies to the distribution out of hidden equity contributions by the direct shareholder (to the extent the shareholder can prove the origin respectively creation of the respective reserves).2 Dividend payments out of other reserves are taxable, but may benefit from privileged income taxation if the Swiss resident recipient holds a qualifying stake of at least 10 per cent in capital of the distributing entity. The latest tax reform slightly increased the taxable dividend inclusion from 60 to 70 per cent at the federal level and to at least 50 per cent at the cantonal level.
Value added tax
Switzerland has a favourable VAT regime for holding companies: holding companies are considered to carry out entrepreneurial activities, can be registered as VAT payers and can therefore claim input VAT refunds. In January 2024, the Swiss Federal Court (BGer 9C_154/2023 of 3 January 2024) has confirmed that, in the case of holding companies, the refund of input VAT can only be claimed in respect of services rendered and goods purchased after registration in the VAT register. For example, if a holding company receives consultancy services in the period 2018-2023 and registers for VAT only per 1 January 2023, the input VAT refund would only be granted in respect of services rendered after 1 January 2023 (allocation pro ratio temporis).3 In a more recent decision relating to inland tax, the Swiss Federal Court (BGer 9C_756/2023 of 31 July 2024) has revised its earlier position. The Swiss Federal Court’s new position denies a mandatory temporal link between the right to refund input VAT and tax liability. The timing and scope of the input VAT refund rather depends on the use or consumption by the recipient than the entire useful life of the purchased service. Input VAT deduction is permissible if: (1) the service recipient is VAT-registered at the time the invoice is received; and (2) the recipient is engaged in entrepreneurial activity at the time of consumption or use of the acquired services.
This evolving case law appears to be reflected in the latest draft revision of VAT Info 09, published by the Swiss Federal Tax Administration (FTA). The draft suggests that a newly formed company may claim input VAT on pre-incorporation costs, provided these costs are directly related to its future business activities.
Many services provided by financial institutions are exempt from VAT, including traditional banking activities, the sale of shares as well as intermediary services in respect of such sales. In a departure from EU practice, intermediary services in respect of capital contributions into companies are currently not considered to be exempt from VAT (the case is currently pending before the Swiss Federal Court).
Recent changes relevant for financial institutions
The extension until 31 December 2031 of the withholding tax exemption on interest paid on ‘coco-bonds’ or write-off bonds keeps these instruments attractive to foreign investors.
From an international perspective, Swiss financial institutions – but also other companies domiciled in Switzerland – are increasingly affected by international transparency initiatives, such as the automatic exchange of information (first exchange of collected information by Switzerland in September 2018), the US Foreign Account Tax Compliance Act or the spontaneous exchange of tax rulings (first rulings exchanged by Switzerland in May 2018). Also, certain types of structured products (eg, securities lending) are under increased scrutiny by the Swiss Federal Tax Authority with regard to the refund of Swiss withholding tax, as the beneficial ownership is often challenged. Several court cases are currently pending in Switzerland in this regard.
General tax considerations for Swiss M&A transactions
Taxable acquisitions and dispositions: asset deal versus share deal
In the case of taxable acquisitions or disposals, Swiss resident buyers and sellers often have conflicting interests. A (Swiss) buyer often prefers an asset deal, whereas a (Swiss) seller typically prefers a share deal, owing to the facts described below.
Asset deal
Buyers generally prefer an asset deal to limit their risks from the acquired business, to achieve a step-up in tax basis and to have the possibility to offset financing expenses with operating income. Compared to a sale of shares, capital gains resulting from sales of assets are generally subject to full corporate income tax (no participation relief applies) at the level of the selling company. The subsequent distribution of such proceeds to the shareholders generally constitutes a taxable dividend (with privileged taxation of qualifying dividends for Swiss individuals and participation relief for Swiss corporate shareholders). Against this background, sellers generally prefer a share deal, where the capital gains are either generally tax-exempt for Swiss individuals or can benefit from participation relief (see below).
An asset deal is often considered when only part of a company (eg, one business division) is to be sold. The asset deal gives the buyer the opportunity to acquire only the necessary assets and to acquire them with the right acquiring entity (eg, to centralise IP directly in one entity). In such cases, it may also be possible for the seller to carry out a share deal by way of a tax-neutral demerger (see comments below) of the business (or part thereof) to be sold to a new Swiss company and the subsequent sale of the shares in this Swiss company.
Where individual assets are acquired, the purchase price is allocated to the different assets. Based on accounting rules, the acquired assets are stepped up to their fair market value, which is relevant to the buyer for capital gains tax purposes in the event of a future sale. This also allows the buyer to depreciate or amortise such assets from their new accounting and tax basis. Any tax losses carried forward by the selling entity are not transferred to the buyer but remain with the selling entity (and may be set off against the capital gains realised on the asset deal).
If the purchase price exceeds the fair market value of the assets acquired in the purchase of a business, the excess may be allocated to goodwill. Goodwill is generally depreciated in the Swiss financial accounts of a Swiss resident buyer, with tax rules allowing either a 40 per cent annual depreciation on a declining balance basis over five years or 20 per cent annual on a straight-line basis (general depreciation options for intangibles).
Generally, no historic tax liabilities are assumed by the buyer, except for joint and several liability with the seller in certain cases (where the seller does not carry on a business and deregisters for VAT purposes), VAT succession (where a (part of) business unit is transferred to a related party) or joint liability for social security contributions if employees are transferred.
The downside of asset deals is the transfer of contracts with, for example, suppliers and service providers with the consent of the counterparty, who may use this to renegotiate existing agreements. Furthermore, an asset-by-asset deal may require more (legal) work and the setting up of individual acquisition entities in the case of cross-border transactions. Finally, the risk of a fully taxable capital gain for the seller tends to increase the purchase price for the buyer. This may be outweighed by the tax benefit to the buyer arising from the higher amortisation and the ability to deduct financing costs in the acquisition entity against the income of the acquired business. The sale of real estate may be subject to Swiss real estate gains tax or real estate transfer tax. These taxes vary from canton to canton and, in cantons with the monistic system, real estate capital gains tax applies instead of corporate income tax, which may be significantly higher. Should taxable securities be sold as part of the assets, securities transfer tax needs to be considered as well, if a Swiss securities dealer is involved.
From a VAT perspective, the transfer of assets generally is subject to 8.1 or 2.6 per cent VAT, but often the mandatory or voluntary notification procedure applies when a business unit is transferred between Swiss VAT-registered persons.
Share deal
In practice, corporate sellers generally prefer a share deal owing to the applicability of the participation relief (federal and cantonal or communal level) on capital gains, provided that shares of at least 10 per cent in another corporation (in certain circumstances a sale of a smaller percentage qualifies) that have been held by the seller for at least one year, are sold. Individuals resident in Switzerland who sell shares as private assets generally benefit from a tax-free capital gain on the sale of shares (subject to various restrictions).
At the buyer level, the purchase price is fully attributable to the acquired shares, which cannot be depreciated in a Swiss acquisition company unless their fair market value has declined. Goodwill cannot be separately capitalised in the balance sheet.
A reduction in value (impairment) is tax-deductible for the Swiss corporate buyer. Consequently, a subsequent increase in value is subject to corporate income tax. A revaluation of a qualifying participation that has been depreciated (ie, a participation of at least 10 per cent) is required for tax purposes if the impairment is no longer justified (clawback provision).
Historical tax risks remain with the Swiss target and will crystallise at that level. Likewise, any deferred tax liability on the difference between the market and tax book values of assets remains with the acquired Swiss target and is usually reflected in the purchase price. The tax loss carry-forwards of the acquired company generally remain available for future use (subject to certain limitations due to deemed tax abuse, eg, the sale of a de facto liquidated company). However, the tax loss carry-forward is generally not confirmed by the tax authorities in the tax assessments, which may make valuation difficult.
Real estate capital gains tax (generally payable by the seller) or real estate transfer tax may be triggered if a (majority) shareholding in a real estate company is sold, as this is considered by most cantons and communities as economic change of ownership of the underlying Swiss real estate.
If a Swiss securities dealer is involved in a share deal (as a party or intermediary), securities transfer tax may be triggered.
In the case of a share deal, no VAT applies, since the transfer of shares is exempt from VAT.
A common withholding tax issue for a buyer to consider is the Swiss Federal Tax Authority’s ‘old reserves theory’. It applies to retained earnings that are subject to a potential non-refundable withholding tax on dividends. For example, due to a non-Swiss seller or selling entity that does not benefit from a full withholding tax refund under an applicable double tax treaty. If due to a change of ownership the non-refundable withholding tax would be reduced to a lower rate than pre-deal, Swiss tax authorities may qualify the distributable reserves as earmarked at the higher (pre-deal) withholding tax rate with the consequence that future dividend distributions of the ‘tainted’ reserves are subject to non-refundable withholding tax up to this higher rate. The amount subject to the higher withholding tax rate is usually the lower of retained earnings of the Swiss target company (distributable reserves for corporate law purposes, subject to withholding tax) and non-operating assets (not required for the conduct of the business, at group level) at the time of change of ownership. There are also further anti-abuse theories with respect to past non-refundable withholding tax, for example, in the event of a partial or full liquidation of the Swiss target following an acquisition, which should be considered by a buyer. A buyer should typically consider the limitations due to a potential extended international transposition as another withholding tax topic (see below).
Swiss resident individual sellers that benefit from a tax-free capital gain on the sale of privately held shares in a Swiss or foreign entity may face retroactive taxation in the event of an indirect partial liquidation. If the target has distributable reserves (for corporate law purposes, subject to withholding tax) and non-business-related assets in the group that are distributed by the buyer within five years after the sale, this amount is taxable as dividend for the seller. As a result, the seller will usually include an indemnity clause in a share purchase agreement (SPA) requiring the buyer to indemnify the seller for any indirect partial liquidation triggered (see comments below) during a five-year blocking period.
The downsides of a share purchase are generally the lack of a tax-efficient amortisation of the purchase price as well as the reduced availability of debt pushdown options on the level of the Swiss operating company (see ‘Acquisition financing’).
Tax-free acquisitions and dispositions
In contrast to taxable acquisitions and dispositions, there are various types of tax-free acquisitions and dispositions of domestic entities that are tax-neutral, provided that the relevant conditions are fulfilled, such as:
- merger;
- demerger;
- conversion; and
- transfer of assets within a group.
The Swiss tax treatment of such reorganisation follows a ‘substance over form’ approach, that is, generally considers the end result (regardless of how it was structured from a legal perspective).
As a general condition for income tax neutrality, a continued tax liability in Switzerland and a transfer at the (tax) book values are required. Apart from this, Swiss tax legislation and the applicable circular published by the Swiss Federal Tax Authority (which has recently been updated) state the specific conditions to be met for each type of reorganisation.
Tax-neutral reorganisation as pre-transaction step
As mentioned, sellers typically prefer a share deal. To shape the target into its ideal form, pre-deal carve-in or carve-out transactions are quite common. Similarly, conversions of partnerships or sole proprietorships into corporations before a sale are often seen but need to comply with a five-year holding period prior to the sale of the shares to qualify as tax neutral. Capital increases without repayment to the former partner generally do not result in a breach of this holding period.
Pre-deal carve-outs are usually structured as a tax-neutral demerger, for example, with a spin-off of the business unit to be sold or retained to a new Swiss company. Such demerger mainly requires that a business unit (or part of it) remains with the transferring company and a business unit (or part of it) is transferred to the new Swiss company and continued. However, there is no holding period (ie, shares in the entity with the spun-off business can be sold immediately after the demerger). The requirements to qualify for a business unit or partial business unit are as follows:
- the company performs services in the market or towards affiliated entities;
- the company has its own personnel; and
- the personnel expenses are appropriate in proportion to the revenues.
In the case of a demerger of a holding company or a mixed holding company, the Swiss Federal Tax Authority’s practice requires for the qualification of a (partial) business unit that the investments are made in subsidiaries, which are predominantly active companies, and include at least two qualifying participations (of at least 20 per cent or otherwise warranting the exercise of a controlling influence) in such companies.
With the Swiss Federal Court Decision of 11 March 2019 (2C_34/2018), the court deviated from this practice and considered it sufficient for a split-up of a holding company if the remaining and the transferred part each consisted of only one operationally active subsidiary, each, as this – based on the transparency theory applied – was equivalent to the spin-off of the underlying operational business itself. The Swiss Federal Tax Authority has amended accordingly its practice in the newly revised circular relating to the tax treatment of restructurings. This practice opens up new possibilities for pre-deal structuring for mixed holding companies, that is, it is sufficient for tax neutrality if one participation of over 50 per cent in an operationally active company is transferred.
Attention should be paid to the fact that tax-neutral intragroup transfers of (partial) business units or operating assets at (tax) book value lead to a five-year blocking period over the asset transferred and the shares in the transferring and receiving entities. If breached, the transferred hidden reserves are retroactively taxed. In the case of a contemplated asset or share deal, this is an important aspect that should be reviewed prior to the transaction by the seller or might also be something that should be reviewed by an interested buyer as it may restrict post-transaction integration opportunities.
More restrictive withholding tax practice of the Swiss Federal Tax Authority
The Swiss Federal Tax Authority’s interpretation of the anti-abuse rules has become more restrictive in recent years.
In the context of a tax-neutral quasi-merger (ie, share-for-share exchange with the contribution of a participation that is controlled by the transferee after the contribution against the issuance of new shares), new qualifying capital contribution reserves may be created (which are not subject to withholding tax upon distribution and not subject to income tax at the level of Swiss resident individuals holding the shares as private assets; certain limitations now apply for Swiss listed companies – see above). Against this background the Swiss Federal Tax Authority has established a practice (based on an old court case) whereby such capital contribution reserves are retroactively disallowed if the contributed participation is absorbed or liquidated within five years of its contribution (ie, treatment like a direct side stream merger). To the extent that such capital contribution reserves have been distributed in the past, this could lead to income and adverse withholding tax consequences. This practice also applies to contributions of shares where 10 per cent or more (with or without capital increase) is transferred between corporate entities.
The second area is the above-mentioned old reserves practice where a latent non-refundable withholding tax burden is acquired. Cases of (partial) liquidation on behalf of the seller, where the acquired Swiss target is either merged or assets or participations are transferred out of the Swiss target, are subject to more scrutiny, for example where the Swiss target was held directly by foreign shareholders or private equity funds. This practice ((partial) liquidation by proxy) is relevant for the integration plans of a buyer since the withholding tax basis is much higher than under the old reserves practice: the hidden reserves of the Swiss target in the partial liquidation are also subject to the previous non-refundable withholding tax rate.
The Swiss Federal Tax Authority’s interpretation of the anti-abuse rules has also become more restrictive in cross-border constellations in recent years. Based on an ‘international transposition’, the Swiss Federal Tax Authority’s practice is to deny a refund of Swiss withholding tax if a person who is not entitled to a full refund of withholding tax transfers shares in a Swiss company to a Swiss company controlled by the same person by way of a sale against a loan, against share capital increase of the receiving entity or a contribution into its capital contribution reserves. This practice has recently been extended to apply to certain acquisitions through Swiss acquisition companies financed by shareholder loans or capital contribution reserves (extended international transposition) even if the seller benefits from a full withholding tax refund. The tightened practice is especially relevant for investments by private equity funds via Swiss acquisition entities. Economic reasons for the Swiss acquisition company may be helpful and should be confirmed in an advance tax ruling.
Acquisition financing
Swiss acquisitions are often structured with a non-Swiss acquisition or financing company. Often, a Luxembourg-resident company is used, which is leveraged with required bank financing for the acquisition (often guaranteed by a subsidiary with upstream guarantees or collateral; a Swiss subsidiary can provide such securities or guarantees up to the amount of its distributable equity).
One reason for this is mainly better conditions for acquisition financing: Switzerland still levies a 1 per cent issuance stamp duty on equity contributions by direct shareholders and lending to a Swiss company needs to comply with the Swiss 10/20 Non-Bank-Rules (see below), to avoid adverse withholding tax consequences on the interest paid. In addition, there is no tax consolidation in Switzerland, and possibilities for a debt push-down in a share deal are generally limited. A set-off of interest expenses on the acquisition financing may be possible if the deal can be structured with a purchase by a Swiss resident operational company, which may use the expenses to be set off against its operational, taxable income.
Should this not be possible, there may still be structuring options to achieve a debt push-down, for example, the distribution of debt-financed dividends (leveraged dividends), whereby the target company resolves a dividend that is not directly settled in cash but left outstanding as an interest-bearing downstream loan by the shareholder or settled by the assumption of external acquisition debt and the allocation of interest expenses to the target company. In addition, debt financed intragroup acquisitions, such as the acquisition of shares or assets from group companies by the Swiss target against an interest-bearing loan, may be possible.
For intragroup loans, the Swiss thin capitalisation rules must be considered, since related-party debt exceeding the maximum permitted debt for tax purposes is qualified as hidden equity, and interest on such hidden equity is not tax-deductible but considered as deemed dividend subject to withholding tax. For calculation of the maximum debt capacity, a Swiss Federal Tax Authority circular sets out the maximum percentage amount of debt that may be taken out per asset category (eg, cash positions can be leveraged by 100 per cent, participations by 70 per cent with debt). The basis for the calculation are the fair market values of the different assets in the balance sheet. The Swiss Federal Tax Authority annually publishes safe haven maximum and minimum interest rates for related-party loans. In response to the current interest market, the Swiss Federal Tax Authority, for the first time since 2015, has significantly increased the safe haven rates for the tax period 2023. Compared to the safe haven rates in 2023, the interest rates in 2025 have slightly decreased (after having remained unchanged for 2024). In addition, the possibility to use a higher or lower interest rate remains open in all cases where the arm’s-length nature of the transaction can be demonstrated.
Landmark transactions
Holcim’s separation of its North American business
In 2024, Holcim announced its plan to separate and list its North American business on the US stock market. This move aims to create a leading pure-play building solutions company in North America, capitalising on the region’s strong construction demand and significant infrastructure investments. The spin-off has been approved by the shareholders at the Annual General Meeting on 14 May 2025 and will be executed as a full capital market separation. The US listing is anticipated to be completed in June 2025.
Acquisition mergers of UBS and Credit Suisse
Following the completion of the acquisition of Credit Suisse Group AG by UBS Group AG on 12 June 2023, and the completion of the merger between UBS AG and Credit Suisse AG on 31 May 2024, the boards of directors of UBS Switzerland AG and Credit Suisse (Schweiz) AG approved the merger between UBS Switzerland AG and Credit Suisse (Schweiz) AG (the Swiss Bank Merger). The Swiss Bank Merger became legally effective on 1 July 2024 upon registration in the relevant commercial register.
The Swiss Bank Merger is another milestone in the complex legal entities’ integration of Credit Suisse group into UBS group following the merger between UBS Group AG and Credit Suisse Group AG, and the merger between UBS AG and Credit Suisse AG.
L’Oréal’s 10% Stake in Galderma Group AG
L’Oréal, the world leader in beauty, acquired a 10% stake in Galderma Group AG, the pure-play dermatology category leader and one of the world’s largest players in injectable aesthetics, from Sunshine SwissCo AG, Abu Dhabi Investment Authority, and Auba Investment Pte. Ltd. (a consortium led by EQT).
Partners Group acquires Empira Group
The Empira Group, a leading vertically integrated investment manager specialising in real estate and managing a portfolio with a gross development value of €14 billion, joined Partners Group, one of the world’s leading private markets investment managers. As part of this transaction, Empira will operate as a specialised, independent real estate brand within Partners Group.
Swisscom acquires Vodafone Italia
In February 2024, Swisscom announced its intention to buy Vodafone Italia. Vodafone Italia was merged with Swisscom’s Italian subsidiary Fastweb. The subsidiary is now called Fastweb + Vodafone. The closing of the transaction took place on 31 December 2024. With a value of €8 billion, this was one of the largest Swiss M&A transactions of 2024.
Novartis’s Acquisition of Mariana Oncology
Novartis has announced its acquisition of U.S.-based radiopharmaceutical company Mariana Oncology for USD 1 billion upfront, with the potential for an additional US$750 million contingent on achieving specific milestones. This strategic move aims to enhance Novartis’s portfolio in precision cancer treatments, particularly in the field of radioligand therapies (RLTs).
Merger of Helvetia and Baloise
On 22 April 2025, the Swiss insurers Helvetia and Baloise announced their merger of equals. After the merger of Baloise into Helvetia, the new group, to be called Helvetia Baloise Holding, will form the second-largest insurance group in Switzerland and one of the leading insurance groups in Europe. The completion of the merger remains subject to approval by the shareholders of both Helvetia and Baloise in their extraordinary general meetings on 23 May 2025, as well as the necessary regulatory and antitrust clearances. The deal is expected to be completed in the fourth quarter of 2025.
General tax considerations for cross-border M&A transactions
An inbound, immigration transaction can be structured in different ways, as follows.
Immigration merger
In principle, an immigration merger (inbound) must comply with the provisions of the domestic merger law; thus, the same rules apply to an inbound merger as to a Swiss domestic merger. Consequently, an inbound merger can be carried out tax-free if the conditions for a Swiss domestic merger are met. The main question is whether the foreign legislation permits an immigration merger and under which conditions. Since 1 January 2020, there is a legal basis for a tax-neutral step-up of the hidden reserves (including goodwill) of a foreign company merged into a Swiss company (with the exception of hidden reserves on qualifying participations) to market values for Swiss corporate income and capital tax purposes, irrespective of the book values for accounting purposes. However, there is no step up for withholding tax purposes. The transferred goodwill can be amortised for tax purposes over 10 years. Thus, we expect this option to become more popular. The same rules apply in the case of a change of domicile or shift of the place of effective management or the transfer of relevant functions to Switzerland.
Quasi-merger
A very popular alternative to an immigration merger or a transfer of seat of a foreign company to Switzerland is a cross-border quasi-merger. A quasi-merger is a share-for-share exchange between an acquiring and a target company, whereby the shareholders of the target company receive at least 50 per cent of the value of their compensation in the form of new shares of the acquiring company, and the target company legally survives as a subsidiary of the acquiring company, whereby the acquiring company must control at least 50 per cent of the voting rights in the target company after the transaction.
Qualifying quasi-mergers with Swiss and foreign target companies are principally tax-neutral for the companies involved. Foreign-resident shareholders of the foreign target company are not taxed in Switzerland. Swiss resident private individual shareholders of the foreign target company generally realise a tax-neutral capital gain (or loss) on the entire quasi-merger consideration (an exception applies, however, in the case of a transposition). The immigration quasi-merger can typically be done tax-neutrally at fair market value and the share premium at the level of the Swiss acquiring company generally qualifies as capital contribution reserves, which can be distributed without withholding tax. The limitations introduced by the last tax reform for Swiss-listed entities do not apply to distributions out of foreign capital contribution reserves that are or were created, for instance, by quasi-mergers involving the contribution of non-Swiss participations. Certain limitations may need to be considered (see ‘More restrictive withholding tax practice’), in the case of mergers or liquidations of the Swiss target within five years of a quasi-merger.
Most cross-border transactions (into Switzerland) are structured as quasi-mergers (acquisition by a Swiss entity). From a tax perspective, such quasi-mergers resulted in significant capital contribution reserves, for example, in the case of the combination of LafargeHolcim under a common Swiss holding company. Restrictions on the creation of capital contribution reserves may apply in the case of a Swiss target due to the extended international transposition practice.
Landmark transactions
TE Connectivity changes place of incorporation from Switzerland to Ireland
On 14 March 2024 the board of directors of TE Connectivity unanimously approved a proposed change of the company’s place of incorporation from Switzerland to Ireland. The immigration into Ireland is structured as a merger between the current holding company, which is incorporated under Swiss law with its Irish based subsidiary. As a result of the merger, each shareholder of Swiss holding company would receive one ordinary share of the new Irish holding company. The shareholders approved the merger in June 2024.
Relocation of incorporation of Bunge from Bermuda to Switzerland
Bunge, a global agribusiness and food company, completed its relocation from Bermuda to Switzerland on 1 November 2023. The company’s group holding entity is now officially Bunge Global SA, registered in Geneva, Switzerland. Despite the move, Bunge remains listed on the New York Stock Exchange under the ticker BG and continues its global operations as usual. The decision to relocate was based on an extensive review of business operations and global tax trends, with Switzerland offering better alignment with commercial activities, a central location within key markets, and a long-standing presence in the country.
BiGene Ltd. opens Regional Office in Basel-Stadt, Switzerland
BeiGene, a global biotechnology company specializing in cancer treatment, relocated its legal domicile from the Cayman Islands to Basel-Stadt in Switzerland effective 18 March 2024. The move strengthens BeiGene’s presence in Europe and serves as a hub for its regional operations. The Basel office initially housed 150 employees, supporting commercial and clinical activities across the continent. The company aims to expand its reach and advance its mission of delivering innovative medicines to more patients worldwide.
Change of domicile of Cavotec SA from Switzerland to Sweden
Cavotec SA, a global cleantech company, plans to relocate its registered office from Switzerland to Sweden through a share-for-share offer, allowing shareholders to exchange their current shares for shares in a new Swedish parent company. The offer, expected to be announced in the second or third quarters of 2025, aims to maintain shareholders’ ownership share and voting power. Upon completion, the new entity will be listed on Nasdaq Stockholm, and Cavotec SA shares will be delisted.
Key tax issues in M&A transactions – tax practice points for M&A dealmakers
In the case of an asset or share deal, the Swiss tax-related objectives of a Swiss seller and buyer are often, as outlined above, diametrically opposed. Finding the most tax-efficient deal structure is often the subject of lengthy negotiations. Swiss individuals as sellers will usually insist on share deals and it is market practice that a buyer must accept an indirect partial liquidation indemnity obligation under the SPA.
Depending on the structure of the deal, the focus of the tax due diligence will vary: in a share deal, a buyer generally inherits all historical tax risks of the target, but in an asset deal, the buyer is jointly and severally liable with the seller for certain taxes and the acquired real estate may be encumbered with a pledge for past real estate taxes.
From a buyer’s perspective, there are certain potential pitfalls that should be considered regarding acquisition financing, for example: issuance stamp duty on direct equity financing into a Swiss company may be mitigated by substitution with a grandparent contribution or by making use of exemptions for reorganisations (eg, certain share contributions).
There is limited interest deductibility for intragroup financing owing to thin capitalisation limitations and safe-haven interest rates.
Swiss 10/20 Non-Bank-Rules to avoid 35 per cent Swiss interest withholding tax of a Swiss borrower, which mean that the Swiss borrower may not have more than 10 non-banks as lenders under one facility with the same terms and not more than 20 non-banks as lenders under different terms. Swiss interest withholding tax can also be triggered in the case of a foreign borrower with downstream guarantees by a Swiss parent entity and a detrimental use of the funds in Switzerland or, in certain cases, also upstream or cross-stream guarantees or securities by Swiss entities. The practice with respect to detrimental downstream guarantees by Swiss parents has been relaxed by the Swiss Federal Tax Authority in spring 2019. As a result, the acquisition financing agreements require specific language to address this topic and are often subject to Swiss tax ruling confirmations.
There is no tax consolidation for income tax purposes and thus limited options for a debt push-down; this should be taken into account when modelling the purchase price or tax benefits of the financing.
Repatriation of funds from the Swiss target to service the external debt without triggering indirect partial liquidation limitations (in the case of Swiss individual sellers, eg, by arm‘s-length upstream loans) or dividend withholding tax leakage; non-refundable withholding tax on dividends may apply either due to the situation of the seller (eg, old reserves practice) or if the acquisition company is not entitled to a full withholding tax refund under an applicable double-tax treaty. In addition to beneficial ownership and fulfilment of the general conditions (shareholding quota, minimum holding period), the reduction of the withholding tax under a double tax treaty requires in particular that the acquisition company has sufficient substance from the perspective of the Swiss Federal Tax Authority. The reduction of withholding tax at source under a double tax treaty is subject to the prior authorisation of the Swiss Federal Tax Authority, which usually requests detailed information about the rationale and set-up of the acquisition company. Further, withholding tax on distributions by a Swiss target to a Swiss acquisition company set up by a buyer who is not entitled to a full withholding tax refund (eg, a private equity fund) may not be fully refunded if the acquisition company shows more share capital or capital contribution reserves than the target (extended international transposition). This does not apply if there are economic reasons for the Swiss acquisition company, such as significant external financing or reinvestment by Swiss shareholders or shareholders entitled to a full refund.
In a share deal, Swiss withholding tax aspects in general should not be neglected. The Swiss concepts of ‘old reserves’, respectively ‘(partial) liquidation by proxy’, are a speciality of Swiss tax practice of which a buyer is often unaware. To assess potential exposure in this regard, which may provide an opportunity to negotiate a lower purchase price, a buyer also needs to look at the past shareholder history (ie, not only the situation as per signing of the transaction).
Other relevant aspects for a buyer in a tax due diligence are, in particular:
- existing blocking periods, for instance, from past reorganisations, which need to be considered in the context of potential post-closing integration work;
- deferred tax liabilities on hidden reserves that are permitted from a Swiss tax perspective, for example, inventory allowance, lump-sum allowance for bad debt;
- deferred tax liabilities arising from past depreciation of shares in subsidiaries. These depreciations may need to be reversed after the transaction if higher values can be justified (eg, based on the purchase price);
- earn-out arrangements for sellers continuing to work for the target or non-compete agreements may partly qualify as taxable income for the seller and lead to social security contribution consequences in the target company; and
- the shares acquired could in general qualify as employee shares and accordingly, under certain circumstances, lead to taxable salary for the sellers upon the sale and trigger social security contribution consequences in the target company.
A very positive aspect of Switzerland as a tax jurisdiction is the ease of access to the tax authorities and the broad possibilities to obtain advance tax ruling confirmations within a reasonable time frame. This is particularly important in transactions to obtain certainty, for example, whether the requirements of a tax-neutral reorganisation are met, whether certain upstream loans or distributions do not trigger the indirect partial liquidation taxation or whether certain upstream guarantees by Swiss entities do not trigger interest withholding tax for loans to foreign borrowers. Transactional tax rulings with a unilateral context are generally not subject to the international ruling exchange. Tax rulings that were obtained by the Swiss target may also reduce tax risks for the buyer. For any tax rulings, it is important to note that they are only binding to the extent the relevant facts are fully disclosed and the described transaction is implemented as described.
Swiss securities transfer tax aspects in share deals should not be forgotten. Financial institutions in Switzerland are accustomed to this tax, but it should be noted that each corporation in Switzerland may qualify as a Swiss securities dealer and as such become subject to securities transfer tax, if it acts as a party to a deal or is involved as an intermediary. The tax currently applies both to the transfer of Swiss and foreign shares (or other securities and bonds). The Swiss Federal Court recently tightened the requirements that a securities dealer can rely on the fact that the other party also qualifies as a securities dealer only if the evidence is provided within three days. Otherwise, the securities dealer must pay both parts of the securities transfer tax. Also, potential securities transfer tax implications for an M&A adviser who can, as confirmed in a recent court case, qualify as a Swiss securities dealer, act as intermediary in transactions and thus become subject to securities transfer tax, should be considered. Similarly, the role of a potential Swiss resident parent holding company in the context of a transaction should be carefully reviewed, as it often qualifies as a Swiss securities dealer and could also trigger a securities transfer tax on the transaction if it acts as intermediary in the sense of Swiss stamp duty law (see above).
The impact of potential future developments at the international level also needs to be monitored in the context of M&A transactions, since assumptions for the valuation of the estimated tax burden may be affected. A current hot topic is the OECD’s Pillar Two project, with which a global minimum taxation of 15 per cent must be achieved for multinational groups with an annual turnover above €750 million (see above). The effects need to be reflected in M&A transactions where, for example, an international group acquires a target that could have a detrimental or beneficial impact on its Pillar Two position. Further, the consolidation of joint venture entities for Pillar Two purposes must be considered in M&A situations in pricing or contractual terms, since negative tax implications and costs could arise that are not in line with the economic allocation of profits.
This article first appeared on Lexology | Source
