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

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.

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