The Swiss Federal Tax Administration (“SFTA”) issued a practice note (German/French) clarifying the topic of group holding or management companies acting as intermediaries mainly in an M&A transaction in view of the securities transfer duty. The new practice applies with immediate effect to all pending cases and will lead to a relaxation in this controversial topic.

Legal Background

The securities transfer duty is levied if taxable certificates are transferred for consideration and at least one securities dealer is involved, either as a counterparty or intermediary (Art. 13 para. 1 FSDA, German/French). In addition to banks and companies with taxable certificates with a book value of at least CHF 10 million, private individuals and companies (regardless of legal form, including permanent establishments of foreign companies) are also deemed to be securities dealers if they (art. 13 para. 3 lit. b FSDA, German/French):

• deal with taxable certificates on behalf of third parties; or
• intermediate the purchase and sale of taxable certificates while acting as an investment advisor or asset manager

While art. 13 para. 1 FDSA is aimed at intermediary activities of already registered securities dealers, art. 13 para. 3 lit. b FSDA covers cases in which a person becomes a securities dealer through the intermediary activity.

Relief for Group Holding Companies

Holding companies typically have taxable certificates (mainly participations in group companies) with a book value of at least CHF 10 million. Their liability for securities transfer duty must therefore be examined under art. 13 para. 1 FDSA. According to the new practice of the SFTA, such holding companies will no longer be liable to pay securities transfer duty in the following cases:

• The holding company commissions an independent investment bank to carry out a transaction (purchase or sale) and remunerates it; or
• An M&A transaction is negotiated by a person who does not belong to the holding company.

Relief for Group Management Companies

Management companies typically do not have any taxable securities which is why their tax liability is to be examined on the basis of art. 13 para. 3 lit. b FSDA. The SFTA has clarified that the exclusive intermediation between group companies on the basis of a contract does not constitute a commercial activity that falls under art. 13 para. 3 para. 3 lit. b FSDA.

Deloitte’s View

The SFTA's practice note is to be welcomed and leads to a relaxation of the previous practice, which has resulted in legal uncertainty in the past. However, this practice note should not be understood to mean that in the future any behaviour of group holding and management companies in the context of an M&A transaction may no longer give rise to a securities transfer duty obligation. A case-by-case assessment is required, as this practice note addresses only narrowly defined circumstances.

If you would like to discuss more on this topic, please reach out to our key contact below.

Key contact

Thomas Hug - Partner, National Tax Office

Thomas is the leader of Deloitte Switzerland's National Tax Office. He has a proven track record of being at the forefront of international tax developments and analysing their impact from a Swiss tax technical perspective. Thomas has published thought-leading articles and books, and is frequently asked by industry groups, universities and tax and accounting associations to make presentations or lead seminars. He serves as a substitute judge at the Zurich Tax Court of Appeal.

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