TRAF - Transitional Measures


The tax reform will come into force on 1 January 2020. After New Year's Eve 2019/2020, cantonal tax privileges for holding, domicile and mixed companies will be abolished. In order to mitigate the additional tax burden, companies that benefitted from privileged tax treatment until the end of 2019 will have the option of disclosing their hidden reserves in a tax-neutral manner (socalled "old step-up") and depreciating them over a period of 5-10 years. Alternatively, the affected companies can apply for an order by the competent tax administration in order to determine the amount of hidden reserves. These hidden reserves can then be taxed at a special tax rate over a period of 5 years in case of their realisation (so-called "special rate solution"). The treatment of hidden reserves is clearly regulated. Other questions remain unanswered: In particular, the handling of value recoveries on depreciated participations after the change of status.

  1. Old step-up 1.1. General

    If, in the context of a change of the tax status, the previously privileged taxed company (holding, domicile or mixed company) chooses the option of applying the old step-up, it can disclose its hidden reserves accumulated during the privileged tax status as well as the created goodwill in a tax-neutral manner in the tax balance sheet. The disclosed hidden reserves can then be depreciated over a specific period (5-10 years, varying from canton to canton). Depending on the canton either a dynamic depreciation or a linear depreciation may be chosen. Dynamic depreciation would be subject to cantonal tax relief restrictions. The cantons can - to a certain extent - design the regulations according to their own needs and interest. Hence, the regulations may vary greatly between the cantons (while e.g. the canton of Zug provides for an overall tax relief restriction of 70%, the canton of Basel-Stadt applies an overall tax relief restriction of 40%).

    1.2. Real estate

    Not all hidden reserves can be disclosed and depreciated in a tax-neutral manner by applying the old step-up. If hidden reserves relate to real estate, a tax neutral step-up is not possible, since the realisation of such hidden reserves was already ordinarily taxable under the privileged tax status. The abolishment of the privileged tax status thus has no consequences with regard to the taxation of hidden reserves on real estate.

    1.3. Participations

    The step-up situation is different for participations. In the case of...

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