Tax free capital gain or taxable income ? Anticipate the risk !
A lot has been written on the problematic of enterprise transmittal (company’s transfer) over the last few years.
The basics lie in the fact that our tax system is based on the principle that private capital gains are tax free. As an example, the shareholder who sells his shares does not pay any income tax in Switzerland on the gain realized. Our tax system is also based on the principle of the economic double taxation: profit tax at the level of the company and income tax at the level of the shareholder, should it be a salary or an open or deemed dividend distribution.
Those two principles tend to force shareholders to hoard the profits within the company and to look for a share deal at the time of exit. The tax authorities, well supported by the Federal Court, qualified this process as a case of abuse and treated number of sale operation as a fully taxable income for the shareholder.
Even if the Tax Reform II has leveraged the tax consequences of such a qualification (even though it is still better to be resident in Schwyz rather than in Neuchâtel…), it is still a drama for the businessman to sell his enterprise and to see most or part of his gain disappear in taxes while a proper tax planning could have allowed him to realize a fully tax free capital gain. The same can be said for managers who are involved in a management buy-out.
Our knowledge in that field is based on the treatment of similar cases all over the last ten years. We could see the evolution of trend, we have closely followed the practice, court case and law changes, and we have participated to number of conferences and articles on the topic. Out of our specializations, it is surely our preferred one! It is therefore useless to point out that in our hands, you will be treated by the best specialists of that field and we will be able to guide you efficiently to avoid the numerous traps around the enterprise transmittal (transfer of company) and to avoid the bad surprise of an unexpected and expensive taxation.