Switzerland has become a major hub for initial coin offerings (ICOs). Yet to date, there has been little clarity about the resulting tax implications. Recent discussions and tax ruling negotiations with representatives of several tax authorities in Switzerland have provided more clarity on the tax implications of ICOs, at least regarding tokens issued by Swiss companies raising funds under the promise of a participation in future revenues.
Switzerland is in the process of adopting legislation on electronic identification. The Federal Council published a preliminary draft e-ID Act and opened it for consultation by any interested actors. The Federal Council recently shared the consultation findings and commissioned the Federal Department of Justice and Police to prepare a revised draft act by Summer 2018.
The Federal Council recently issued a draft of the revised Federal Data Protection Act. This draft marks yet another decisive step towards the overhaul of the Swiss data protection landscape. The act's revision is an ongoing process intended to modernise Switzerland's data protection landscape and align it with revised EU legislation.
The government recently published a new detailed draft for a corporate tax reform. The purpose of this new draft is to set the basis for new rules on corporate tax (the last proposal having been rejected in a nationwide referendum) and to secure Switzerland's overall attractiveness as a business location. The draft includes several measures that have been discussed in the past, but it also addresses the criticism that contributed to the rejection in the February referendum.
Parliament has passed the Value Added Tax Act Reform Bill. Barring a referendum, this new legislation will completely replace the existing legislation and will introduce significant changes in key areas; businesses will have only a few months to prepare for the transition.
The ongoing disruption of credit and capital markets is urging banks to pursue refinancing solutions that have rarely been used in the past or that have previously been used in a different context. A recent transaction shows that the mortgage bond system might become an efficient refinancing tool in situations where a secured refinancing transaction is difficult to structure or an off-balance sheet securitization is not possible.
Including: Assignment of Accounts Receivable and Other Payment Claims; Security in Real Estate Lending; Synthetic Securitization; Alternative Risk Transfer; Merger Law Benefits for Real Estate Portfolio Transactions; Opco/Propco Transactions; Taxation of ABS Transactions; Other Issues.
The use of operating company ('opco') and property company ('propco') structures has recently become increasingly common in the Swiss lending and securitization market. Using these structures often leads to more efficient and less expensive financing. This update outlines some of the most significant features and issues related to setting up an opco/propco structure.
Rates of corporate income tax in Switzerland are low compared to those of some other European countries, making the jurisdiction an attractive location for multinational companies. The European Commission has recently formally challenged the cantonal corporate tax regimes, holding that they are in violation of Article 23 of the 1972 Free Trade Agreement between the European Economic Community and Switzerland.
A provision of the Swiss Merger Act facilitates a transfer of assets from the originator to the securitization vehicle in a securitization transaction. Although some issues require clarification, the new transaction method will in most cases facilitate the transfer of a portfolio consisting of a large number of agreements, particularly with regard to the third-party consent required for such a transfer.
In June 2006 a new federal law was passed governing the taxation, at both federal and cantonal level, of an indirect partial liquidation involving the sale of participations equal to 20% or more of the nominal share capital of the relevant company, and limiting the restricted period to a maximum of five years. The new law significantly improves the tax position of the seller and the purchaser.
Switzerland has recently seen a major increase in both origination and securitization activity in the commercial real estate market. It is expected that this year will see another increase in commercial mortgage-backed securitization (CMBS) transactions, and that future multi-jurisdictional and pan-European deals including Swiss assets will be conducted.
Revisions to the Federal Stamp Duty Act entered into force on January 1 2006. Among other things, foreign resident corporations with shares listed on a recognized stock exchange and their foreign resident affiliates are exempt from the Swiss transfer stamp duty triggered on sales or purchases of taxable securities from a Swiss securities dealer or intermediated by a Swiss securities dealer.
The section on foundations of the Swiss Civil Code has been revised to take into account the importance of charities and not-for-profit institutions in Switzerland, as well as the corporate governance issues associated with their increasing importance and the value of the assets they manage. Some of these amendments also have an impact on the tax situation of the founders and donors.
The Swiss-EU Savings Agreement provides for measures equivalent to those laid down in the EU Directive on the Taxation of Interest Payments and the EU Parent-Subsidiary Directive. The relief from withholding tax on dividends under the agreement will strengthen Switzerland's position as a location for holding companies and promote investment activity in the jurisdiction.
Rising stock markets have seen a return of employee stock and stock option plans as a common part of compensation and incentive packages for executives and other highly compensated employees. A draft bill including revised rules on the taxation of benefits granted under employee incentive plans is pending in the second chamber of the Federal Parliament.
In 2005 the Federal Tax Administration issued a circular letter on lump-sum deductions with respect to foreign-to-foreign business transactions. Swiss resident corporations and foreign resident corporations with a Swiss permanent establishment are no longer allowed to apply lump-sum deductions on foreign-to-foreign business transactions, but must keep records of their expenses.
Through the proposed law known as the Corporate Tax Reform II, the Federal Council aims to make Switzerland more attractive to entrepreneurs and investors. However, provisions relating to the recharacterization, under certain circumstances, of tax-free capital gains as taxable distributions are controversial and are likely to be debated by the first chamber of the Federal Parliament in spring 2006.
The Swiss Federal Banking Commission is consulting on its Position Paper on the Applicability of the Investment Fund Law to Structured Products and Other Finance Vehicles. The paper asserts that structured finance products have evolved to the point that they have become publicly offered substitutes for regulated investment funds; therefore, they should be regulated as investment funds.
Giving away software for free (freeware) has become increasingly popular with many companies over the last decade. This update summarizes the issue of liability for freeware pursuant to Swiss law, focusing on liability for damage to other software, hardware, data loss and other damage resulting from its use.