Transfer stamp tax: Practice clarification from 1 November 2024

According to a court decision from 2021, a parent company acts as an intermediary for the purposes of the transfer stamp tax in an M&A transaction (which is carried out by another group company) if a member of the board of directors or employee of the parent company initiates the transaction as an evidence broker («Nachweismäkler») or plays a significant role in the negotiations and conclusion of the contract (intermediary broker; «Vermittlungsmäkler»).

Since group parent companies often have investments with a book value of more than CHF 10 million in their balance sheet, they often qualify as a securities dealer regardless of their activity. Consequently, the parent companies have to pay the transfer stamp tax on M&A transactions.

However, according to the previous practice of the SFTA, management companies within a group can also become securities dealers due to their activity as intermediaries (i.e. without having taxable securities with a value of more than CHF 10 million in their balance sheet).

As a result of the aforementioned court decision, the SFTA has been assessing in tax audits the role of employees of parent companies and intra-group management companies in M&A transactions in more detail.

Last Friday, the SFTA published the following practice clarification:

• With regard to the activities of holding companies:
  The intermediation of a domestic holding company is only subject to transfer stamp tax according to Article 13 Para. 1 of the Stamp Duty Act, if this activity qualifies as an evidence brokerage or an intermediary brokerage. Neither evidence brokerage nor an intermediary brokerage in this sense exists if
  • the holding company (or another group company) commissions an independent investment bank to carry out a transaction (purchase or sale of an investment) and compensates it for this; or
  • if the negotiations are conducted by a person who does not belong to the domestic holding company.

• With regard to the activities of intra-group management companies:
  • The intermediation of taxable securities within a group is not considered a commercial activity. If the brokerage activity is carried out exclusively within the group, this group company does not qualify as securities dealer and consequently does not have to pay the transfer stamp tax.

The clarification of the practice regarding the activities of group parent companies basically reflects the practice established in the 2021 court case. The additional note that when an investment bank is commissioned, the qualification as an intermediary is waived will mean a relaxation of the practice in some cases. In practice, however, the clarification of the practice regarding the group's internal management companies (which do not qualify as securities dealers based on the CHF 10 million criterion) is likely to be particularly important.

It remains to be seen how narrow the scope of the new practice is and whether it is also applicable to non-M&A transactions. The practice clarification therefore requires interpretation. A case-by-case assessment is therefore still necessary. In the practice clarification, the SFTA then also calls for a ruling to be submitted for the specific facts. The practice clarification will be applied to all open facts with immediate effect.