I OVERVIEW

i Investment vehicles in real estate

Swiss law does not provide for special legal entities for real estate investments but does provide distinct rules for 'real estate investment companies' (see Section II.iv). Any given legal entity may function as a real estate investment company, although the majority are limited companies. Swiss law also provides for regulated investment vehicles, which contain special provisions for real estate investments.

ii Property taxes

Swiss taxation system

The Swiss taxation system differs between taxes levied at the federal level and taxes levied at the cantonal and communal levels. Income tax, stamp duty, withholding tax and value-added tax are federal taxes. The cantons and communes also levy income tax, equity tax, real estate holding tax, real estate transfer tax, real estate stamp duty and (in some cantons) a special tax on real estate capital gains.

Tax on real estate capital gains

Cantons and communes may tax capital gains realised from the sale of real estate under either the monistic or dualistic systems.

In the monistic system, all real estate capital gains are subject to a special tax. The tax is exclusive, namely the capital gains are not subject to any further charge. As a result, capital gains on real estate are not part of the net profit of a legal entity and not subject to income tax. The tax is levied on the difference between the investment value and the sales proceeds. An exception applies to recaptured depreciations on real estate, which are subject to income tax. Recaptured depreciations refer to the difference between the investment and the lower book values at the time of sale. The cantons Berne (BE), Basel-Landschaft (BL), Basel-City (BS), Jura (JU), Nidwalden (NW), Schwyz (SZ), Ticino (TI), Uri (UR) and Zurich (ZH) apply the monistic system.

In the dualistic system, capital gains from real estate owned by individuals are subject to a special real estate capital gains tax, while capital gains from real estate held by legal entities are part of the net profit and subject to income tax. In general, there is no special tax on real estate capital gains for legal entities in this system. The cantons Argovia (AG), Appenzell-Innerrhoden (AI), Appenzell-Ausserrhoden (AR), Fribourg (FR), Geneva (GE), Glarus (GL), Graubünden (GR), Lucerne (LU), Neuchatel (NE), Obwalden (OW), Sankt Gallen (SG), Schaffhausen (SH), Solothurn (SO), Thurgau (TG), Vaud (VD), Valais (VS), and Zug (ZG) apply (in principle) the dualistic system.

The tax rate varies widely and depends on the canton and the holding period. In monistic cantons, short holding periods are subject to heavy taxation as a measure against real estate investment speculation. Tax rates may vary from nil up to 60 per cent. Note that the seller is liable for the real estate capital gains tax. This requires special attention from the buyer as the tax authorities in monistic cantons have the statutory right to put a mortgage on the real estate to secure the payment of the tax.

Real estate holding tax

Real estate holding tax is levied in the cantons (except for AG, BL, GL, SO, SZ, ZG and ZH). There is no such tax at the federal level. Tax base is the gross value of direct real estate holdings in the competent canton. Debts are not taken into account. Real estate holding tax is levied annually and for the entire year. A pro rata calculation (e.g., for the year of sale) is not possible. Tax rates range from 0.02 to 0.3 per cent.

The tax in the canton NE applies only to real estate held for investment purposes. Some cantons levy real estate holding tax only if it is higher than the ordinary income tax. Such provisions exist in the cantons AR, BS, LU, OW, NW, SH, TG and TI.

Real estate transfer tax

Real estate transfer tax is levied on the transfer of rights in rem (e.g., ownership of real estate) or the transfer of shares in real estate investment companies. It is a cantonal or communal tax and exists in all cantons except for the cantons AG, GL, SH, SZ, TI, UR, ZG and ZH. No real estate transfer tax is levied at the federal level. The tax is levied on the fair market value of the real estate transferred. Tax rates range from 1 to 3.3 per cent.

Real estate transfer tax is not to be confused with the real estate capital gains tax. While both taxes apply in real estate sales, real estate transfer tax applies to the value of real estate, while real estate capital gains tax applies to the profit made.

Real estate transfer stamp duty

All cantons (except for SZ) levy real estate transfer stamp duties when the respective entry of a change in ownership of real estate is entered into the public real estate record. In most cantons, these stamp duties are levied on the fair market value of the real estate and can be as high as 1.3 per cent of the value of the real estate.

Direct income tax

Legal entities domiciled outside of Switzerland may be subject to federal, cantonal and communal direct income tax. Income generated from Swiss real estate or connected rights in rem as well as income generated from claims secured by mortgages on Swiss real estate (e.g., mortgage interest payments) are subject to direct income taxation. Additionally, trading with Swiss real estate leads to tax liability as well. Tax rates range from 12 to 25 per cent.

Withholding tax on loans secured by Swiss real estate

Interest paid on loans by a non-domestic creditor, which are secured by Swiss real estate, is subject to a special withholding tax of 13 to 33 per cent (depending on the canton where such real estate is located). The right to levy this withholding tax may be reduced (or totally excluded) by the interest article in a double taxation agreement between Switzerland and the residence country of the creditor.

Overview
Canton Real estate transfer tax Real estate transfer stamp duty Monistic/
dualistic system
Withholding tax on real estate secured loans
Argovia (AG) - 0.4% Dualistic 16%
Appenzell-Innerrhoden (AI) 1.0% 0.2% Dualistic 21%
Appenzell-Ausserrhoden (AR) 2.0% 0.1% Dualistic 21%
Berne (BE) 1.8% CHF 200 Monistic 21%
Basel-Landschaft (BL) 2.5% CHF 300 Monistic 18%
Basel-City (BS) 3.0% 0.1% Monistic 18%
Fribourg (FR) 3.0% 0.15% Dualistic 21%
Geneva (GE) 3.0% 0.25% Dualistic 20%
Glarus (GL) - 0.5% Dualistic 23%
Graubünden (GR) 2.0% 0.1% Dualistic 15%
Jura (JU) 2.1% 0.15% Monistic 18%
Lucerne (LU) 1.5% 0.2% Dualistic 20%
Neuchatel (NE) 3.3% 0.15% Dualistic 20%
Nidwalden (NW) 1.0% 0.1% Monistic 15%
Obwalden (OW) 1.5% 0.15% Dualistic 18%
Sankt Gallen (SG) 1.0% 0.2% Dualistic 23%
Schaffhausen (SH) - 0.7% Dualistic 18%
Solothurn (SO) 2.2% Time/cost Dualistic 18%
Schwyz (SZ) - - Monistic 13%
Thurgau (TG) 1.0% 0.4% Dualistic 18%
Ticino (TI) - 1.3% Monistic 33%
Uri (UR) - 0.2% Monistic 15%
Vaud (VD) 3.3% 0.15% Dualistic 20%
Valais (VS) 2.25% 0.2% Dualistic 18%
Zug (ZG) - CHF 180 p. hour Dualistic 13%
Zurich (ZH) - 0.1% Monistic 17%

II ASSET DEALS VERSUS SHARE DEALS

i Legal framework

Swiss civil law provisions on real estate transactions are to be found in the Swiss Code of Obligations (corporate aspects of the share deal, and contractual aspects of asset and share deal) and in the Swiss Civil Code (real estate aspects). It is to be noted that the term 'real estate' is rarely defined by tax laws. The term generally refers to the definition in the Swiss Civil Code, under which it covers actual real estate, independent and permanent rights recorded in the land register (e.g., construction rights, source rights), mines, and co-ownership in real estate (Article 655(2), Civil Code).

ii Corporate forms and corporate tax framework

Overview of different companies

The Swiss Code of Obligations provides for several legal forms for companies: limited companies, limited liability companies, limited partnerships, cooperatives, foundations and associations, as well as other forms. The most relevant forms are the limited company, the limited liability company and the limited partnership. They make up 89 per cent of registered businesses (excluding sole traders).

Overview of corporate tax framework

Legal entities and collective investment funds directly holding Swiss real estate are subject to unlimited Swiss income taxes, if they are domiciled in Switzerland or if they are effectively managed from Switzerland. The tax base is the worldwide income with unilateral exceptions for permanent establishments and real estate located abroad.

Legal entities without domicile or place of effective management in Switzerland are subject to limited direct income taxes if and to the extent that they have a permanent establishment in Switzerland, they directly hold Swiss real estate, have other rights in rem (or similar rights) connected to Swiss real estate or are trading with Swiss real estate (see Section I.ii, 'Direct income tax', et seq.).

The effective tax rates of direct income taxes range from 12 to 25 per cent. The effective tax rates will be lowered in the near future. It is expected that the effective tax rates will be lowered to 12 to 18 per cent.

iii Direct investment in real estate

Indirect taxes on purchase

The purchase of Swiss real estate triggers real estate transfer tax and possibly VAT, as well as additional fees connected to the notarisation of the purchase agreement and the execution of the transfer in the landmark register.

Real estate transfer tax is levied by the canton or commune where the real estate is located. The purchaser generally owes the tax but in some cantons (AR, BL and OW), the vendor and purchaser are liable for tax in equal parts. Tax rates range from 1 to 3.3 per cent.

The transfer of rights in rem connected to real estate is usually exempt from VAT but the vendor can voluntarily opt-in to VAT if the premises are not used as a dwelling. If the seller has voluntarily opted in, the VAT tax rate is 7.7 per cent. The purchaser of the premises bears the initial economic burden of the tax, but may deduct the payment against the VAT it remits to the Federal Tax Administration. If the purchaser is not subject to Swiss VAT, a voluntary registration will have to be considered to enable the VAT deduction. Tax credits are paid out in full if the deduction is higher than the VAT owed to the Federal Tax Administration.

Lastly, the direct purchase of real estate may trigger certain fees. The Swiss Civil Code requires real estate purchase agreements to be publicly notarised (Article 657(1), Civil Code). The fees for such public notarisation depend on the canton. Further, real estate record fees for the amendment of the ownership registry may be due.

Income taxes on holding

Income generated from real estate (e.g., lease payments) are subject to direct taxation in Switzerland. This applies whether the owner of the company is domiciled in Switzerland or abroad. Unrealised capital gains are not subject to direct income tax. The direct taxation rates range from 12 to 25 per cent, but it is intended that tax rates will be lowered in the near future (presumably 12 to 18 per cent).

Real estate holding taxes are levied by cantons and communes. They are not due in all jurisdictions (see Section I.ii, 'Real estate holding tax'). If the tax is due, it ranges from 0.02 to 0.3 per cent of the gross value of the property. Debts secured by the real estate are not deducted from the tax base.

Income taxes on disposal

The disposal of Swiss real estate may trigger direct income tax or special real estate capital gains tax, or both. This applies to companies domiciled in Switzerland and abroad.

In dualistic cantons, capital gains from real estate are subject to direct income tax. The tax is levied on the difference between book value and sales proceeds. The investment value as well as the holding period do not affect the tax rate. The tax rate ranges from 12 to 25 per cent, but will be lowered in the near future (presumably 12 to 18 per cent).

In monistic cantons, the special real estate capital gains tax is applied. The tax is levied on the difference between investment value (purchase price plus value-enhancing expenses) and sales proceeds. Cantons may allow for different deductions. The tax rates vary between nil and 60 per cent depending on the place where the real estate is located, the holding period and capital gains. Recaptured depreciations (i.e., the difference between book value and investment value) are subject to corporate income taxation. Direct federal income tax is also payable (the effective tax rate amounts to 7.8 per cent) and is levied on the difference between the book value and the sales proceeds.

Permanent establishment issues

As income from Swiss real estate as well as capital gains realised from the disposal of Swiss real estate are subject to Swiss taxation, permanent establishments are not an issue per se. However, if a permanent establishment holds real estate in multiple cantons, the situation needs careful evaluation. Income from real estate held for investment purposes is taxed in the canton of the real estate, while income from real estate held for operational purposes is taxed at the domicile of the permanent establishment.

iv Acquisition of shares in a real estate company

General remarks

It is necessary to define the term 'real estate investment company' (REIC) for the tax assessment of a share deal. There is no definition of the term in legislation and jurisprudence developed a rather wide definition of the term. For tax purposes, any company is considered a REIC if its sole or predominant purpose is the acquisition, construction, management or sale of real estate. In addition to the companies' purpose and its annual accounts, tax authorities also take into account the actual business activity.

Indirect taxes on purchase of shares

The purchase of REIC shares may trigger real estate transfer tax and possibly transfer stamp duty.

The purchase of REIC shares qualifies as 'economic change of ownership' of the real estate asset. The economic change of ownership refers to any permanent transfer of ownership rights of a real estate asset without transferring the property under civil law (i.e., without change of the direct owner in the landmark registry). The purchase of REIC shares is the most frequent type of an economic change of ownership. With regard to real estate transfer tax, the law and practice of the cantons differ. Some cantons do not levy real estate transfer tax on the acquisition of such shares (e.g., VD, SZ), while the majority levies real estate transfer tax when the purchaser directly or indirectly acquires more than 50 per cent in the REIC. Rates for real estate transfer tax range from 1 to 3.3 per cent.

The transfer of ownership of shares against payment are subject to transfer stamp duty, if one of the parties to the contract or one of the intermediaries is a securities dealer. Securities dealers are banks and similar companies, traders and intermediaries as well as legal entities that hold securities with a combined value above 10 million Swiss francs. The tax amounts to 0.15 per cent of the consideration for securities issued by a Swiss REIC and 0.3 per cent for securities issued by a foreign REIC.

Income from the sale of shares are exempt from VAT without credit. It is not possible to opt-in voluntarily.

Income taxes on holding of shares

Dividends are part of the net profit and are generally subject to direct income tax. However, if the shareholder holds at least 10 per cent of the share capital or is entitled to 10 per cent of the profit and reserves of the company; or if he or she holds shares with a market value of at least 1 million Swiss francs, the shareholders' income tax is reduced in proportion to the net income from shares to the total net income. The income from such qualified participations is therefore factually exempt from direct federal, cantonal and communal income tax. For withholding tax, see Section III.iv.

Income taxes on disposal of shares

The sale of REIC shares may lead to direct income tax as well as real estate capital gains tax.

In monistic cantons, the sale of the majority of the REIC shares is considered an economic change of ownership. Therefore, the seller of REIC shares domiciled in cantons with a monistic system is liable to the special real estate capital gains tax. In the cantons of AG and LU, the sale of the majority of the shares in a non-cantonal REIC also leads to real estate gains tax on properties located in the canton.

No real estate capital gains tax is levied in cantons applying the dualistic system. On the federal level and in dualistic cantons, capital gains from the sale of REIC shares are subject to direct income tax. However, the shareholder may benefit from the participation exemption for such capital gains if additional requirements are met. In addition to the requirements for the participation exemption set out above, the shareholder must have held the participation for at least one year. The income tax amount is then reduced in proportion to the net income from shares to the total net income.

In this context, it should be noted that many cantons grant the participation exemption irrespective of whether or not the capital gains result from the sale of REIC shares. However, the tax laws of the cantons of GR, SZ and TG contain explicit provisions according to which the participation exemption is excluded in such a case. Lastly, the canton VD, which follows the dualistic system, exceptionally levies the special real estate capital gains tax on the capital gains from the sale of a majority of REIC shares, if the conditions for participation exemption are met.

If the legal entity selling the REIC shares is domiciled in another canton, the increase in value subject to real estate capital gains tax has to be deducted from the capital gains from the sale of REIC shares. According to the Federal Supreme Court's case law on the intercantonal prohibition of double taxation, the right to taxation lies with the real estate canton. If this deduction were not granted, this would result in effective double taxation. Accordingly, capital gains recorded with the real estate capital gains tax must also be excluded from taxable profit in intra-cantonal cases, but at the time of writing there is no case law on this issue.

Tax regime of the REIC

In Switzerland, real estate investment companies are not subject to any special tax regime apart from their treatment with regard to economic change of ownership.

Overview of income tax on disposal of real estate or REIC shares
Argovia

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 18.6 per cent but will be lowered to 18.2 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. If a legal entity applies the participation exemption to the sale of REIC shares, real estate capital gains tax is levied. However, a company subject to the holding tax regime remains liable for income tax on the sale of REIC shares. Otherwise, if a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: there is no tax-exempt minimum amount. The amount of capital gain does not affect the tax rate. The tax rate is degressive in relation to the holding period: it amounts to 40 per cent for holding periods under one year. The tax rate is reduced by 2 per cent per annum in the first 10 years and then by 1 per cent per annum until the 25th year (with a minimum tax of 5 per cent). There is no additional surcharge for short holding periods. Real estate capital gains tax owed for the sale of REIC shares is credited against direct income tax, if the underlying properties are sold within 10 years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of voting rights are sold. The sale of minority participations does not trigger real estate capital gains tax.

Appenzell-Innerrhoden

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 14.2 per cent but will be lowered to 12 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision preventing the application of the participation exemption to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 4,000 Swiss francs are tax-exempt. The tax rate takes into account the capital gains generated: the tax rate amounts to 15 per cent for capital gains up to 10,000 Swiss francs and increases up to 40 per cent for capital gains exceeding 100,000 Swiss francs. The tax is reduced in relation to the holding period: by 5 per cent for a holding period of five full years and then by 3 per cent per annum until the 20th year (with a maximum reduction of 50 per cent). The canton applies a surcharge to short holding periods: the tax is increased by 1 per cent for every month under three years (i.e., a maximum surcharge of 36 per cent for a holding period under one month). The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Appenzell-Ausserrhoden

Income tax: the canton generally follows the dualistic system. The effective income tax rate is approximately 13 per cent. For legal entities, this applies to both profit from the sale of real estate and the sale of REIC shares. There is no legal provision preventing the application of the participation exemption to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 3,000 Swiss francs are tax-exempt. The amount of capital gain does not affect the tax rate of 30 per cent. The tax rate is reduced in relation to the holding period: by 2.5 per cent per annum after a holding period of 10 full years (with a maximum reduction of 50 per cent). The canton applies a surcharge to short holding periods: the tax is increased by 50 per cent for holding periods under six months, by 35 per cent for holding periods under one year, by 20 per cent for holding periods under two years, by 10 per cent for holding periods under three years and by 5 per cent for holding periods under four years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Bern

Real estate capital gains tax: the canton generally follows the monistic system. Capital gains up to 5,200 Swiss francs are tax-exempt. The tax rate takes into account the capital gain generated: 1.44 per cent for exceeding capital gains up to 2,700 Swiss francs and increases up to 8.1 per cent for capital gains exceeding 195,300 Swiss francs. The tax rate is multiplied by the communal and cantonal coefficient (which varies between 4.1 and 5.5). The tax amount is reduced in relation to the holding period: by 2 per cent per annum after a holding period of five years with a maximum reduction of 70 per cent. The canton applies a surcharge to short holding periods: the tax rate is increased by 70 per cent for holding periods under one year, by 50 per cent for holding periods under two years, by 35 per cent for holding periods under three years, by 20 per cent for holding periods under four years and by 10 per cent for holding periods under five years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Income tax: regardless of the above, capital gains from real estate are exclusively subject to direct income tax, if the legal entity is in the business of real estate trading and has improved the value of the real estate property by at least 25 per cent of the purchase price (measuring the value enhancing activities). That effective income tax rate is 21.4 per cent.

Basel-Landschaft

Real estate capital gains tax: the canton generally follows the monistic system. There is no tax-exempt minimum amount. The tax rate takes into account the capital gain generated: 12 per cent for capital gains up to 30,000 Swiss francs, and 25 per cent for capital gains over 120,000 Swiss francs. There is no reduction for long holding periods. The canton applies a surcharge to short holding periods: the tax is increased by 1.66 per cent for every month under five years (with a maximum of 100 per cent for a holding period under one month). The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Basel-City

Real estate capital gains tax: the canton generally follows the monistic system. Capital gains up to 500 Swiss francs are tax-exempt. The amount of capital gain does not affect the tax rate of 60 per cent. The canton has a special provision as not only the tax rate is reduced in cases of long holding periods but also the taxable capital gain itself is reduced. The taxable capital gain is reduced by 3 per cent per annum after a holding period of five years with a maximum reduction of 60 per cent. Additionally, the basic tax rate of 60 per cent is reduced by 0.5 per cent for every month after a holding period of three full years. After nine years of holding, a tax rate of 30 per cent is applied. There is no additional surcharge for short holding periods. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Fribourg

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 19.9 per cent but will be lowered to 13.8 per cent. For legal entities, this applies to profit both from the sale of real estate and the sale of REIC shares. There is no legal provision preventing the application of the participation exemption to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 6,000 Swiss francs per year are tax-exempt. The amount of capital gain does not affect the tax rate. The tax rate is reduced in relation to the holding period. The tax rate is 22 per cent for holding periods under two full years and is reduced by approximately 2 per cent for every two years of holding. After more than 15 years, a tax rate of 10 per cent is applied. The tax rate is increased by 40 per cent if the holding period is less than five years and if the capital gain exceeds 400,000 Swiss francs per calendar year (i.e., the total capital gain is divided by the number of years). The sale of REIC shares is only subject to real estate capital gains tax, if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Geneva

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 24.2 per cent but will be lowered substantially to 14 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision preventing the application of the participation exemption to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: there is no tax-exempt minimum amount. The amount of capital gain does not affect the tax rate. The tax is reduced in relation to the holding period: 50 per cent for holding periods under two years, which is then reduced in a non-linear way. For holding periods over 25 years, a tax rate of zero per cent applies. There is no additional surcharge for short holding periods. The canton has a special provision if legal entities pay direct income tax as well as real estate capital gains tax on the same sale. The real estate capital gains tax is levied as a first step and then credited to income tax. An overpaid amount is refunded to the tax payer. The sale of any REIC-share is subject to real estate capital gains tax. Minority participations are subject to tax.

Glarus

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 15.7 per cent but will be lowered to 12.4 per cent. For legal entities, this applies to profit both from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 5,000 Swiss francs are tax-exempt. The tax rate takes into account the capital gains generated: 5 per cent on the first 5,000 Swiss francs of taxable capital gains. The tax rate is increased by 5 per cent for every additional 5,000 up to 30,000 Swiss francs, after which a tax rate of 30 per cent is applied. The real estate capital gains tax is reduced in relation to the holding period: by 5 per cent after five full years of holding, then by 3 per cent per annum between the sixth and the 15th year of holding, then 5 per cent per annum up to the 30th year of holding (with a maximum reduction of 90 per cent). The canton applies a surcharge to short holding periods. The tax rate is increased by 30 per cent for holding periods under one year; by 20 per cent for holding periods under two years; by 15 per cent for holding periods under three years; and by 10 per cent for holding periods under four years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Graubünden

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 16.1 per cent but will be lowered to 14 per cent. For legal entities, this applies to profit from the sale of real estate and the sale of REIC shares likewise. There is a legal provision according to which REIC shares do not qualify for participation exemption (i.e., income tax is owed on the sale of REIC shares). If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 4,200 Swiss francs are tax-exempt. The tax rate takes into account the capital gain generated: 5 per cent on the first 9,100 Swiss francs of taxable capital gains. The tax rate is increased by 1 per cent for every additional 9,100 Swiss francs of taxable gains up to 191,100 Swiss francs where a tax rate of 25 per cent is applied. The capital gains tax is reduced in relation to the holding period: by 1.5 per cent for every year of holding after 10 full years (with a maximum reduction of 51 per cent). The canton applies a surcharge to short holding periods. The tax rate is increased by 2 per cent for every month under two years (i.e., a maximum of 48 per cent for a holding period under one month). The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Jura

Real estate capital gains tax: the canton generally follows the monistic system. Capital gains up to 4,000 Swiss francs are tax-exempt. The tax rate takes into account the capital gains generated: 3.5 per cent for capital gains up to 50,000 Swiss francs; 4.5 per cent for gains from 50,000 to 100,000 Swiss francs; then 5.5 per cent for gains from 100,000 up to 200,000 Swiss francs; and anything above is taxed at a rate of 6 per cent. These tax rates are multiplied with the communal and cantonal coefficient (from 4.25 to 5.2). The capital gains tax is reduced in relation to the holding period: by 1 per cent for every year after a holding period of 10 full years with a maximum reduction of 30 per cent. The canton applies a surcharge to short holding periods. The tax rate is increased by 50 per cent for holding periods under two years or by 25 per cent for holding periods under five years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Income tax: the canton switches from the monistic system to the dualistic system in some cases. The capital gains of a professional real estate trader are not subject to the real estate capital gains tax but to direct income tax.

Lucerne

Income tax: The canton generally follows the dualistic system. The effective income tax rate is 12.3 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. However, there is a practice according to which real estate capital gains tax is levied in these cases. If a legal entity does not owe corporate income tax on a capital gain for any reason, real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 13,000 Swiss francs are tax-exempt. The tax rate takes into account the capital gain generated. The tax rate ranges from 0.5 per cent for small capital gains up to 5.8 per cent for capital gains above 1,984,500 Swiss francs (multiplied with a coefficient of 4.2). The capital gains tax is reduced in relation to the holding period: by 1 per cent for every year after a holding period of eight full years with a maximum reduction of 25 per cent. The canton applies a surcharge to short holding periods. The tax rate is increased by 50 per cent for holding periods under two years and by 25 per cent for holding periods under five years. The canton also has a maximum tax burden provision, which caps all real estate capital gains taxes at a maximum of 40 per cent. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares or voting rights are sold. The sale of minority participations does not trigger real estate capital gains tax.

Neuchâtel

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 15.6 per cent but will be lowered in the near future to 13.4 per cent. For legal entities, this applies to profit both from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. If a legal entity does not owe income tax on a capital gain for any reason, real estate capital gains tax is owed.

Real estate capital gains tax: there is no tax-exempt minimum amount. The tax rate is progressive and takes into account the capital gain amount from a tax rate of 10 per cent on the first 5,000 Swiss francs up to 33 per cent on capital gains above 135,000 Swiss francs. The special capital gains tax is reduced in relation to the holding period: by 6 per cent for every year of holding after five full years with a maximum reduction of 60 per cent. The canton applies a surcharge to short holding periods. The tax rate is increased by 60 per cent for holding periods of under one year; by 45 per cent for under two years; by 30 per cent for under three years; and by 15 per cent for under four years. The sale of any REIC shares is subject to real estate capital gains tax. Minority participations are subject to tax.

Nidwalden

Real estate capital gains tax: the canton generally follows the monistic system. There is no tax-exempt minimum amount. The amount of capital gain does not affect the tax rate. The real estate capital gains tax rate is degressive in relation to the holding period: the tax rate amounts to 36 per cent for holding periods less than one year. The tax rate is then reduced in a non-linear way. After a holding period of 30 years or more, a tax rate of 12 per cent applies. There is no additional surcharge for short holding periods. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Obwalden

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 12.7 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 5,000 Swiss francs are tax-exempt. Capital gains exceeding that level are subject to a flat tax rate of 1.8 per cent, which is to be multiplied with the cantonal and communal coefficients (from 7.1 to 8.3 depending on the commune). There is no reduction for long holding periods. The canton applies a surcharge to short holding periods. The tax is increased by 30 per cent for holding periods under one year; by 20 per cent for holding periods under two years; and by 10 per cent for holding periods under three years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

St. Gallen

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 17.4 per cent but will be lowered in the near future to 14.2 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 2,200 Swiss francs are tax-exempt. The tax rate is progressive and takes into account the capital gain amount from a tax rate of 0.5 per cent (for capital gains up to 5,000 Swiss francs) to 10 per cent (for capital gains exceeding 600,000 Swiss francs). This tax rate has to be multiplied with the cantonal and communal coefficient (3.4). The special capital gains tax is reduced in relation to the holding period: by 1.5 per cent per annum after a holding period of 15 full years with a maximum reduction of 30 per cent. The canton applies a surcharge to short holding periods. The tax amount is increased by 1 per cent for every year of holding less than five full years (i.e., a maximum surcharge of 5 per cent). The sale of REIC shares is only subject to real estate capital gains tax if the majority of voting rights are sold. The sale of minority participations does not trigger real estate capital gains tax.

Schaffhausen

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 15.8 per cent but will be lowered in the near future to 12.5 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is a legal provision according to which REIC shares do not qualify for participation exemption. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 5,000 Swiss francs are tax-exempt. The tax rate takes into account the capital gain generated: capital gains exceeding 5,000 Swiss francs are subject to a progressive tax rate from 2 per cent to 15 per cent (for capital gains above 100,000 Swiss francs). The calculated tax is multiplied with the cantonal and communal coefficients (ranging from 1.6 to 2.3). The capital gains tax is reduced in relation to the holding period: by 5 per cent after a holding period of six full years and by another 5 per cent for every further full year of holding (capped at a maximum reduction of 60 per cent). The canton applies a surcharge to short holding periods. The tax rate is increased by 50 per cent for holding periods under six months. For every six months of holding, this amount is decreased by 5 per cent (i.e., there is no surcharge after five full years of holding). The canton has a special provision according to which the total tax burden (including multiplication with cantonal and communal coefficient) may not exceed 50 per cent of the real estate capital gains. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Schwyz

Real estate capital gains tax: the canton generally follows the monistic system. Capital gains up to 2,000 Swiss francs per year are tax-exempt. The tax rate takes into account the capital gain generated. The tax rate ranges from 8 per cent (for capital gains up to 5,000 Swiss francs) to 30 per cent (for capital gains above 40,000 Swiss francs). The capital gains tax is reduced in relation to the holding period: by 10 per cent after a holding period of five full years and for every full year after that, the tax is reduced by 3 per cent (capped at a maximum reduction of 70 per cent). The canton applies a surcharge to short holding periods. The tax is increased by 40 per cent for holding periods under one year, by 30 per cent for under two years, by 20 per cent for under three years, and by 10 per cent for under four years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of voting rights are sold. The sale of minority participations does not trigger real estate capital gains tax.

Solothurn

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 21.4 per cent but will be lowered in the near future to 13 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 10,000 Swiss francs are tax-exempt. The tax rate takes into account the capital gain generated and is progressive from 5 per cent (for taxable capital gains up to 3,000 Swiss francs) up to 11.5 per cent (for capital gains above 212,000 Swiss francs). The tax rate is to be multiplied with the cantonal and communal coefficient (from 1.7 to 2.4). The capital gains tax is reduced in relation to the holding period: by 2 per cent for every year of holding after a holding period of five full years (capped at a maximum reduction of 50 per cent). There is no additional surcharge for short holding periods. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Ticino

Real estate capital gains tax: the canton generally follows the monistic system. There is no tax-exempt minimum amount. The amount of capital gain does not affect the tax rate. The tax rate amounts to 31 per cent for holding periods under one full year, which is reduced in a non-linear way to 4 per cent for holding periods of over 30 full years. There is no additional surcharge for short holding periods. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Thurgau

Income tax: The canton generally follows the dualistic system. The effective income tax rate is 16.4 per cent but shall be lowered in the near future to 13.4 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. The canton has a provision that the participation excemption may not be applied to the sale of participations over 50 per cent in a REIC. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: there is no tax-exempt minimum amount. The amount of capital gain does not affect the tax rate of 30 per cent. Capital gains tax is reduced by 4 per cent for every year of holding after a holding period of five full years (capped at a maximum reduction of 72 per cent). The canton applies a surcharge to short holding periods. The tax rate is increased by 36 per cent for holding periods under one month, and it is reduced by 3 per cent for every month of holding (i.e., no surcharge after three full years). The sale of REIC shares is only subject to real estate capital gains tax if the majority of voting rights are sold. The sale of minority participations does not trigger real estate capital gains tax.

Uri

Real estate capital gains tax: the canton generally follows the monistic system. Capital gains up to 10,000 Swiss francs per year are tax-exempt. The amount of capital gain does not affect the tax rate. The tax rate amounts to 31 per cent for holding periods under one full year, which is reduced by 1 per cent per annum to 11 per cent for holding periods of over 20 full years. There is no additional surcharge for short holding periods. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Vaud

Income tax: the canton generally follows the dualistic system. The effective income tax rate is approximately 21.4 per cent but will be lowered in the near future to 13.8 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. The canton has a provision that the participation exemption may be applied to REIC shares, but such sale is then subject to real estate capital gains tax. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: capital gains up to 5,000 Swiss francs per year are tax-exempt. The amount of capital gain does not affect the tax rate. The tax rate amounts to 30 per cent for holding periods under one year with a non-linear reduction for every year of holding. The minimum tax rate amounts to 7 per cent for holding periods over 24 years. There is no additional surcharge for short holding periods. The sale of REIC shares is subject to real estate capital gains tax. Accordingly, minority participations are subject to tax.

Wallis

Income tax: The canton generally follows the dualistic system. The effective income tax rate is 21.8 per cent but will be lowered in the near future to 15.6 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: there is no tax-exempt minimum amount. For holding periods under 25 years the following applies: the tax rate is 12 per cent for capital gains up to 50,000 Swiss francs; 18 per cent for capital gains from 50,000 to 100,000 Swiss francs; and 24 per cent for capital gains above 100,000 Swiss francs. The tax is reduced by 4 per cent for every year of holding after six full years (the maximum reduction amounts to a tax rate of 1 per cent up to 50,000 Swiss francs, 2 per cent for gains from 50,000 to 100,000 Swiss francs and 3 per cent for anything above). There is no additional surcharge for short holding periods. The sale of REIC shares is subject to real estate capital gains tax. Minority participations are subject to tax.

Zug

Income tax: the canton generally follows the dualistic system. The effective income tax rate is 14.6 per cent but will be lowered in the near future to 12 per cent. For legal entities, this applies both to profit from the sale of real estate and the sale of REIC shares. There is no legal provision that the participation exemption may not be applied to the sale of REIC shares. If a legal entity is exempt from income tax (e.g., for charitable purposes), real estate capital gains tax is owed.

Real estate capital gains tax: Capital gains up to 5,000 Swiss francs per year are tax-exempt. The tax rate equals the relation of the capital gain to the investment with a minimum tax rate of 10 per cent and a maximum tax rate of 60 per cent. The tax is reduced by 2.5 per cent per year for every year after a holding period of 12 years (with a maximum reduction of 25 per cent). There is no additional surcharge for short holding periods. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

Zurich

Real estate capital gains tax: The canton generally follows the monistic system. Capital gains up to 5,000 Swiss francs per year are tax-exempt. The tax rate ranges from 10 per cent to 40 per cent (for capital gains exceeding 100,000 Swiss francs). The special capital gains tax is then reduced in relation to the holding period: by 5 per cent for a holding period of five full years and then a reduction of 3 per cent per additional year is applied (with a maximum reduction of 50 per cent). The canton applies a surcharge to short holding periods. The tax is increased by 50 per cent for a holding period of less than one year and by 25 per cent for holding periods of less than two years. The sale of REIC shares is only subject to real estate capital gains tax if the majority of shares are sold. The sale of minority participations does not trigger real estate capital gains tax.

III REGULATED REAL ESTATE INVESTMENT VEHICLES

i Regulatory framework

Swiss law provides for regulated collective investment vehicles. Whether or not a certain collective investment scheme is subject to federal supervision is determined by the Federal Act on Collective Investment Schemes (KAG).

ii Overview of the different regulated investment vehicles

Swiss law provides for several collective investment vehicles and distinguishes between open-ended and closed-ended collective investment schemes. Open-ended collective investment schemes are characterised by the fact that investors have a direct or indirect legal claim to the redemption of their participations at net asset value. Swiss law provides for two types of open-ended collective investment schemes: (contractual) investment funds (FcP) and investment companies with variable capital (SICAV).

In the case of closed-ended collective investment schemes, investors have no direct or indirect legal claim to the redemption of their participations at net asset value. The law provides for two types of closed-ended collective investment schemes: limited partnerships for collective investment schemes and investment companies with fixed capital.

From a tax point of view, the more important distinction is between transparent and non-transparent collective investment schemes. In contrast to non-transparent collective investment schemes, transparent collective investment schemes are not subject to income tax except for income from direct Swiss real estate holdings. The other income from transparent collective investment schemes is attributed to their investors. Contractual investment funds, SICAVs and limited partnerships for collective investment schemes are transparent collective investment schemes. SICAFs are non-transparent collective investment schemes.

iii Tax payable on acquisition of real estate assets

Indirect taxes on the purchase of real estate as well as income taxes on the seller of the real estate asset do not differ for regulated or unregulated vehicles (see Section II.iii).

iv Tax regime for the investment vehicle

Holding

Transparent collective investment schemes are not subject to income tax as long as they do not have income from direct real estate. Accordingly, contractual investment funds, SICAVs and limited partnerships for collective investment schemes are only subject to income tax for income from direct Swiss real estate. The tax rate for income from direct real estate may differ from the ordinary income tax rate. For direct federal tax, the tax rate is 4.25 per cent (statutory, not effective). Some cantons tax the profits at the rate applicable to individuals (AR, FR, LU, SG, UR and VS), other cantons tax the profits at the rate applicable to corporations (AI, BE, GR, JU, SZ, TI and ZG) and the last category of cantons taxes the profit at a special rate.

Non-transparent collective investment vehicles are subject to federal, cantonal and communal income taxes. Accordingly, a SICAF is subject to ordinary income taxation. There is no difference between income from directly held Swiss real estate and other income.

Disposal

In monistic cantons, a collective investment vehicle is subject to the special real estate capital gains tax (BL, BS, BE, JU, NW, SZ, TI, UR and ZH) upon the disposal of direct real estate holding. In dualistic cantons and at the federal level, the capital gain on real estate is subject to direct income tax.

The collective investment vehicle may also dispose of a Swiss REIC. That transaction is considered an economic change of ownership and triggers the special real estate capital gains tax in monistic cantons. In dualistic cantons, the capital gains on a REIC is subject to direct income tax.

Other taxes

Equity tax

On the cantonal level, an equity tax is levied on collective capital investments with direct real estate in addition to direct income tax. The tax base is the legal entity's equity. Tax rates range from 0.001 to 0.525 per cent.

Stamp duty

The purchase of participations in collective investment schemes may trigger transfer stamp duty provided that one of the parties to the contract or one of the intermediaries is a securities dealer (see Section II.iv, 'Indirect taxes on purchase of shares'). The transfer tax is based on the consideration and amounts to 0.15 per cent for securities issued by a Swiss resident and 0.3 per cent for securities issued by a foreign resident.

VAT

As most revenues generated by collective investment schemes are exempt from VAT, the threshold of 100,000 Swiss francs for statutory registration is usually not met. However, it needs to be considered whether income from real estate is subject to VAT if it has been opted-in for. In the area of collective investment schemes, the SICAF and SICAV as legal entities as well as the limited partnership for collective investments may be tax subjects for VAT purposes. However, it is a matter of dispute among legal scholars whether the contractual investment fund may be subject to VAT.

Withholding taxes

Switzerland levies withholding tax of 35 per cent on the distribution of dividends. Distributions from contractual investment funds, SICAVs and limited partnerships for collective investment schemes, and distributions from SICAFs are subject to withholding tax.

There is an exemption for transparent collective investment schemes: income generated from capital gains is not subject to Swiss withholding tax. However, capital gains are only exempt if they are realised from the direct sale of an assets. If the transparent collective investment scheme holds a REIC that sells the real estate and subsequently distributes to the collective investment scheme a dividend, the dividend is to be qualified as taxable income and not as capital gain. Income generated from direct real estate holding paid in the form of a separate coupon is also not subject to withholding tax.

v Tax regime for investors

Participations in a transparent collective investment scheme held by a legal entity are subject to the 'book value principle'. This has the following consequences for the investor.

Holding

Distributions from directly held Swiss real estate are exempt from income tax at the level of the investor. The participation exemption does not apply to the dividends distributed by transparent collective investment vehicles (i.e., the contractual fund, the limited partnership for collective investments and the SICAV).

Sale

The sale of units in a collective investment scheme results in the realisation of a taxable profit or loss. Capital gains of the collective investment scheme are subject to income tax.

Redemption

When units of an open-end collective investment scheme are redeemed, the difference between the liquidation proceeds and the book value of the units must be taxed as profit or recognised as a loss.

The situation is different for non-transparent collective investment schemes. The distributions are subject to ordinary income tax at the level of the investor. It is irrelevant if the income is generated by the collective investment scheme from capital gain or from directly held Swiss real estate. However, the participation exemption may be applied.

IV INTERNATIONAL AND CROSS-BORDER TAX ASPECTS

i Tax treaties

In many respects, Swiss treaty policy follows the recommendations of the OECD. With regard to real estate, Article 6 of OECD Model Tax Convention on Income and Capital (OECD-MC) and Article 13 of OECD-MC are particularly relevant. The corresponding articles in Swiss double taxation treaties are largely similar to the OECD-MC, with the exception that since Article 13(4) of OECD-MC was only included in 2003, some double taxation treaties still lack that provision. As a consequence, the sale of REIC shares is a sale of movable assets (unless REIC shares are declared immovable assets in accordance with the definition in Article 6 of the OECD-MC). The following double taxation agreements still lack a provision corresponding to Article 13(4) of the OECD-MC: Austria, Denmark, Germany, Luxembourg, Italy and Sweden.

As of 1 January 2019, Switzerland has concluded double taxation treaties with more than 100 jurisdictions. The full list may be found online.2

ii Cross-border considerations

Unlike many other countries, Swiss law does not provide for any controlled foreign companies (CFC) provisions. This does not, however, mean that profits generated in foreign corporations are irrelevant from a Swiss tax point of view. In practice, it is possible for foreign profits to be taxed in Switzerland if the effective management of the company is in Switzerland, there are Swiss permanent establishments, it is appropriate to pierce the corporate veil, or there are assumed service agreements between group companies or other transfer pricing arrangements.

iii Locally domiciled vehicles investing abroad

Cross-border dividends

Switzerland levies withholding tax of 35 per cent on the distribution of dividends. The repayment of paid-in share capital and reserves from capital contributions are not subject to withholding tax. According to the applicable double taxation treaty, a qualified participation, for the purposes of the participation exemption rules, entitles the vehicle to partial or full relief at source.

Cross-border financing

Switzerland levies a 35 per cent federal withholding tax on interest payments on bond. If the financing is not considered a bond but is secured by domestic real estate, a special withholding tax is levied on interest payments to a foreign resident creditor unless the creditor is resident in a treaty state (i.e., a country with a double taxation treaty attributing the taxing right for interest payments exclusively to the residence state) and is entitled to treaty benefits. The tax rates range from 13 to 33 per cent depending on the location of the real estate.

V YEAR IN REVIEW

The Federal Supreme Court upheld3 the decision of a cantonal administrative court that the requirements for a REIC were met, where the company was supposedly active in the hotel industry, but more than two-thirds of its assets consisted of real estate and more than two-thirds of its income consisted of rental income. Accordingly, the sale of the company triggered real estate transfer tax.

The Federal Supreme Court upheld4 another decision of a cantonal court that companies subject to the holding tax regime are liable for income as well as capital gains from Swiss properties. According to the legal provisions, holding companies are liable for 'income' from Swiss real estate but not for any other income or capital gains. While 'capital gains' are not to be qualified as 'income' in most areas of Swiss taxes, the court held that capital gains from the disposal of Swiss real estate qualify as income from Swiss real estate for the purposes of this provision.

In a cantonal decision, the court held5 that a company is to be classified as a REIC and not as an operating company (for real estate capital gains tax purposes) if, prior to the sale of all shares, the company completely ceases its business operations but keeps the real estate holdings. Interestingly, the court held that the company would have been considered a REIC even if the operational business had not ceased, since the business had no impact on the pricing of the share sale.

VI OUTLOOK

The most important changes are the projected changes in the tax system based on the OECD's Base Erosion and Profit Shifting project. Switzerland will abolish its 'harmful' tax regimes in the near future and intends to lower its tax rates to approximately 12 to 18 per cent. Real estate investment companies will benefit from these lower tax rates as they were not beneficiaries of the 'harmful' tax regimes.


Footnotes

1 Stefan Oesterhelt is a partner and Jan Seltmann is an associate at Homburger AG, Zurich.

2 The list may be found here

3 Judgment 2C_643/2017 of the Federal Supreme Court dated 19 January 2019.

4 Judgment 2C_1000/2018 of the Federal Supreme Court dated 19 March 2019.

5 Judgment of the Berne Administrative Court dated 18 September 2018.