Effects of Switzerland’s company law revision from a tax law perspective

By Cédric-Olivier Jenoure and Sascha Wohlgemuth, Bratschi Ltd.

Effective 01 January 2023, more flexible formation rules and capital requirements will apply to public limited companies in Switzerland. The capital band, a new legal institution, is intended to make the procedures for increasing and reducing share capital more flexible.

Under the new capital band regulation in the Code of Obligations, a company’s board of directors can be authorised by its articles of association to increase or reduce the capital band (i.e. the share capital entered in the commercial register) within a range determined in advance for a maximum period of five years. The resolution must be included in the company’s articles of association and entered in the commercial register.

In order to maintain tax neutrality, the introduction of the capital band regulation has necessitated various special provisions in the relevant tax decrees. From a tax point of view, these new provisions result in a net consideration. This is done by recognising repayments of capital contributions for deposits and premiums made during a capital band for tax purposes only to the extent that they exceed repayments of reserves under the capital band.

With the new tax law provisions, only the net amount of the capital increase remaining after the termination of the capital band can be used to repay tax-free reserves from capital contributions to the shareholders, or to substitute taxable dividends with tax-free capital payments.

The new tax law provisions stipulate that capital increases and capital decreases are to be offset for the duration of the capital band. Regarding capital contribution reserves, a net consideration applies. In the event that capital increases exceed capital repayments during the duration of the capital band, the sum of the capital contribution reserves will only be increased by the difference.

A repayment of capital can only be achieved for listed shares without tax consequences for the investors by private shareholders selling their shares to a legal entity via the second trading line.

Cédric-Olivier Jenoure

GGI member firm
Bratschi Ltd.
Law Firm Services, Tax
Basel, Bern, Lausanne, St. Gallen, Zurich, Switzerland
T: +41 58 258 14 00
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W: bratschi.ch

Bratschi Ltd. is one of Switzerland’s leading and rapidly growing law firms with offices in Basel, Bern, Geneva, Lausanne, St. Gallen, Zug and Zurich. As a full-service law firm, Bratschi Ltd. offers clients a broad range of first-class legal and counselling services in all fields of commercial law and with a strong presence in the public sector as well.

As an attorney and licensed tax expert, Cédric-Olivier Jenoure is deeply familiar with commercial and legal contexts. He provides consulting services for domestic and foreign corporate groups and business owners as well as private individuals, and offers his clients efficient solutions.

Sascha Wohlgemuth

Bratschi Ltd.
Law Firm Services, Tax
Basel, Bern, Lausanne, St. Gallen, Zurich, Switzerland
T: +41 58 258 14 00
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: bratschi.ch

Sascha Wohlgemuth is an attorney and licensed tax expert, who provides consulting services for domestic and foreign corporate groups, business owners and private persons in national and international tax related questions, namely in the areas of restructuring, succession planning and establishing firms.

Published: International Taxation Newsletter, No. 17, Autumn 2022 l Photo: f11photo - stock.adobe.com