Selling real estate in Switzerland – asset deal or share deal from a Swiss tax perspective?

If real estate held by a Swiss legal entity is for sale, there is the option of selling the real estate by the company itself (asset deal) or of selling the shares of the company together with the property (share deal).

If real estate held by a Swiss legal entity is for sale, there is the option of selling the real estate by the company itself (asset deal) or of selling the shares of the company together with the property (share deal).

An asset deal is usually easier to implement than a share deal, which entails the transfer of the company with all its assets/liabilities and its “history”. However, it is a common misconception that a share deal is equivalent to an asset deal in terms of Swiss taxation.

In case of an asset deal, recovered depreciations in the balance sheet are subject to profit tax on cantonal level. Furthermore, the increase in value of the property is either subject to real estate capital gain tax or to the ordinary profit tax, depending on the applicable tax system in the Canton where the real estate is located. In addition to that, direct federal tax is levied on the entire net profit.

By executing a share deal, generally only the cantonal real estate capital gain tax on the increase in value of the real estate is levied. The recorded depreciation in the company is neither taxed at the cantonal nor at the federal level, nor is the value appreciation taxed at federal level. The taxation within the company is hence deferred. The allocation of such tax deferral has to be agreed upon between the seller and the buyer by determining the purchase price of the company.

Furthermore, a share deal may be advantageous in an international cross border context as well. Depending on the applicable double taxation treaty, the right to levy taxes in Switzerland on the real estate capital gains may be restricted, whereas in specific cases a corresponding tax revaluation for real estate capital gain tax purposes may be achieved.

In many cases, a share deal is more advantageous from a tax point of view, as the tax burden does not immediately incur but is deferred or reduced. Such tax effects and benefits have to be taken into account while ascertaining and negotiating the sales price and are usually shared between the seller and the buyer.

This contribution was made by Sereina Mader from our Swiss member firm. For more information, please do not hesitate to contact our tax team (www.beelegal.ch) in Zurich.