Exceptions from standard taxation

The following exceptions from standard taxation are contained in real estate taxation:

  • DTA procedures in accordance with the old OECD Model Convention. (Most DTA’s with Switzerland follow the old OECD Model Convention, which provides for taxation in the country of the seller of the share).
  • Procedures according to the Swiss Merger Act1, in conjunction with the Swiss Tax Harmonisation Act2, 3.

The procedure according to DTA’s or the OECD Model Convention is of interest for tax-optimised real estate investment. In the case of a DTA structured on the basis of the old OECD Model Convention, the sale of an interest to a real estate company through a foreign company in the DTA partner state does not represent a change of ownership which would attract Swiss tax on profit from real estate4.

1 Swiss Federal Law on Merger, Demerger, Conversion and Transfer of Assets and Liabilities (Fusionsgesetz; in brief FusG) of 3.10.2003, SR 221.301, which entered into force as of 1. July 2004.

2 Swiss Federal Law on Tax Harmonisation of 14. December 1990, SR 642.14, e.g. for the Canton of Zurich, which entered into force as of 1. January 2006.

3 The goal of the new provisions on merger, demerger, conversion and transfer of assets and liabilities was to facilitate the conversion and restructuring processes of companies and groups as well as Euro-compatibility. Various civil law processes which attracted taxation prior to the introduction of the Law on Merger are no longer subject to taxation, such as for example: a) real estate companies of a certain size qualify as operating companies (no change of ownership, not subject to real estate tax) and b) tax-neutral demerger of real estate companies.

4 This is a tax-neutral procedure as a consequence of the absence of an actual chargeable event.

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