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Other specificities of the Swiss corporate tax system
Reorganization rules
Swiss tax law allows tax exemption in case of reorganization (i.e., merger, demerger, hive down, share-for-share transfer, transfer of assets, conversion) provided certain conditions are met:
- Continuation of the tax liability in Switzerland.
- Transfer of business assets/investments at tax book values.
- Disposal restriction period or other specific conditions might apply.
Tax neutrality can be achieved for direct, indirect, real estate capital gains tax and real estate transfer tax purposes.
Temporary tax exemption at the cantonal and communal tax levels
The temporary tax exemption is granted to newly established companies that carry out sustainable activities that are of economic importance for Switzerland (and the canton of location).
It also applies to companies that fundamentally change their business or create a new business line and that announce significant economic restructuring. The temporary tax exemption is a maximum of 100% for 10 years.
The federal tax exemption is available in a limited number of regions only.
The cantonal (and communal) tax exemption is available in most of the cantons but not all of them. The exemption at the cantonal level is not linked to the exemption at the federal level. The criteria for the exemption are similar but may differ depending on the cantonal practice. Usually, most of the cantons do apply lighter criteria for start-up businesses highly focused on innovation compared to more common businesses for which the number of job positions created and the amount of investments in the region are likely to be the most important criteria.
Tax ruling process
A tax ruling is a written, binding agreement with the tax authorities on any tax relevant matter (e.g. reorganization of a group, functional currency matters, transfer pricing, interpretation of tax law or practice, etc.). Any risk of unfavorable interpretation of Swiss tax legislation and practice can mostly be eliminated in advance by filing a binding ruling request.
All relevant facts must be disclosed to the competent tax authorities – tax rulings are based on the bona fide principle. The tax authority is going to be bound by its ruling only as long as all facts where properly described and duly reported in the ruling request. Furthermore, there is no limitation in time except if set by the tax authority in the ruling. In case of any changes in tax law, transition periods are generally granted.
