Introduction
With the aim to strengthen the Swiss capital market, on December 17, 2021, the Swiss Parliament adopted a withholding tax and stamp duties reform. The core of the reform is the abolition of the withholding tax on interest payments in relation to newly issued bonds and the abolition of the transfer stamp duty on domestic bonds. In addition, the transfer stamp duty on the sale of qualified participations will be abolished and a legal basis will be created for the payment of withholding tax on manufactured payments. If no referendum is held against it, the reform is expected to become effective as of January 1, 2023.
Abolition of withholding tax on domestic bonds
In future, interest on domestic bonds will no longer be subject to withholding tax. Consequently, it will no longer be necessary for domestic groups to issue their bonds through foreign subsidiaries. The usual restrictions on the use of proceeds of bonds and loan agreements guaranteed or secured by a domestic company will no longer be needed.
Transitional provision
The withholding tax will only be abolished on new bond issues. This is clarified in a transitional provision introduced by the Swiss Parliament. Nothing will change for bonds that are already subject to withholding tax at the time of entry into force. These will remain subject to withholding tax.
However, this only applies to bonds that were formally issued by a domestic issuer and are subject to withholding tax. Foreign bonds that have already been issued can therefore be migrated to Switzerland from the date on which the amendment enters into force without this having any withholding tax consequences. The restrictions on the use of proceeds are also no longer relevant once the amendment enters into force.
Effects on credit agreements
The usual transfer restrictions in credit agreements will also no longer be necessary. Syndication of credit agreements will be possible in the future without corresponding restrictions. The «10 and 20 non-bank rules» will be abolished without replacement.
The only exception is if a credit agreement is secured by domestic real estate, as the withholding tax on such interest is maintained. If a credit agreement is secured by domestic real estate, the permissible transfers should therefore continue to be limited to so-called «treaty lenders», i.e. lenders who are resident in a country with which Switzerland has concluded a double taxation agreement that assigns the right to tax interest exclusively to the country of residence.
Effects on structured products
Today, structured products with an interest component are often issued via foreign companies, as the interest component is otherwise subject to withholding tax. This applies, for example, to the very widely spread reverse convertibles. In future, it will be possible to issue such products from Switzerland without withholding tax consequences. However, certain structured products similar to investment funds and products where dividends are passed on to investors will continue to be subject to withholding tax.
Collective investment schemes
Income from domestic collective investment schemes continues to be subject to withholding tax. As part of the parliamentary consultations, however, an exception was created for interest received by collective investment schemes. In future, such interest may be distributed by collective investment schemes free of withholding tax. On the other hand, the partially demanded exemption for all foreign income of collective investment schemes  was rejected during the consultations. As a result, Switzerland will continue to have a difficult time as a fund production location compared to its foreign competitors.
Interest on customer deposits with domestic banks and insurance companies
Interest on client deposits with domestic banks and insurance companies will continue to be subject to withholding tax. In future, however, only customer deposits of domestic individuals will be subject to withholding tax. Customer deposits of foreign persons who are subject to the AEOI will correctly no longer be subject to withholding tax. In addition, customer deposits of legal entities will no longer be subject to withholding tax. Today, the definition of the term «customer deposit» is extraordinarily broadly. In future, however, only customer deposits with regulated banks and insurance companies will be subject to withholding tax. The so-called «100 non-banks rule» is thus outdated.
Withholding tax on manufactured payments
In its ruling of 21 November 2017, the Federal Supreme Court decided that the levying of withholding tax on manufactured payments (in particular manufactured dividends) did not have a sufficient legal basis. This legal loophole will now be remedied and a corresponding legal basis created. Essentially, the current practice is to be continued unchanged.
Pragmatism article for the withholding tax
As part of the parliamentary consultations, a pragmatism article was also introduced for withholding tax. No withholding tax shall be levied and no refund shall be refused, respectively, as a result of formal defects, if it is apparent or the taxpayer can prove that no tax loss has arisen as a result of non-compliance with formal requirements. The Swiss Parliament&#8217;s source of inspiration was the VAT Act, where a similar article was introduced about four years ago. In contrast to the VAT Act, the practical implications are likely to be minor in the present case.
Transfer stamp duty on domestic bonds
The 0.15% transfer stamp duty on secondary market transactions involving domestic bonds will be abolished. However, the 0.3% transfer stamp duty on secondary market transactions involving foreign bonds will be retained if a domestic securities dealer acts as a party or an intermediary.
Transfer stamp duty on the sale of participations
The purchase and sale of participations in domestic or foreign corporations is currently subject to transfer stamp duty of 0.15% or 0.3%, respectively, if a domestic securities dealer acts as a party or an intermediary. A domestic holding company regularly qualifies as a securities dealer. Now, the brokerage as well as the purchase and sale of participations of 10% or more is in principle no longer subject to transfer stamp duty if the participation qualifies as a fixed asset within the meaning of Art. 960d CO. This is a considerable relief for the M&amp;A activities of domestic groups.
Transfer stamp duty for money market funds
While trading in domestic and foreign money market securities (i.e. bonds with a maturity of less than one year) is already exempt from transfer stamp duty today, the issue of foreign money market funds is in principle subject to transfer stamp duty. Now, the issuance of units of foreign money market funds, which limit their investments in securities to those that have a remaining term to maturity of no more than 397 days, will be exempt from transfer stamp duty. This will make Switzerland a more attractive location for treasury companies.
Entry into force on January 1, 2023
Unless a referendum is held against the bill, the abolition of withholding tax on bond interest will come into force on January 1, 2023. Regarding the other provisions, Swiss Parliament has refrained from imposing a binding date on the Federal Council for the entry into force.

RZ_Preview_VST_SB_02

Reform of withholding tax and stamp duty

On November 17, 2021, SIX published the legal basis for a new regulatory standard for SPACs.
The revised Listing Rules and a new Directive on SPACs define SPACs as companies whose sole purpose is to directly or indirectly acquire an operating company within a maximum of three years after the first day of trading (so-called De-SPAC). The new rules incorporate other typical features of SPACs, such as the deposit of IPO proceeds in an earmarked escrow account, investor consent to a De-SPAC, investors&#8217; redemption right (especially if they do not consent to the De-SPAC), and investors&#8217; liquidation preference.
In preparing the IPO prospectus, SPACs must comply with additional disclosure requirements. Later, in case of a De-SPAC, SPACs have to publish an information document that provides information about the target and the De-SPAC transaction. This document must also include an independent fairness opinion on the valuation of the target company. Furthermore, SPACs are required to publish quarterly financial statements in the two fiscal years following the De-SPAC if the target company does not have financial statements covering three fiscal years in accordance with a recognized accounting standard. Finally, any management transactions must be disclosed.
When the new rules take effect on December 6, 2021, there is nothing to prevent the launch of a SPAC in Switzerland.

SIX Enables SPAC Listings as of December 6, 2021

On November 3, 2021, the Swiss Financial Market Supervisory Authority FINMA (FINMA) published a press release and new guidance (Guidance 05/2021) on the topics of greening the financial system and preventing and combating greenwashing. The communications come in the context of the UN Climate Change Conference in Glasgow and the recent contribution of the Network for Greening the Financial System (NGFS) of which FINMA is a member.
Against the background of the <a href="https://comm.homburger.ch/e/du1rhtx9zh1q/5d1bc79b-5b52-4a15-8fca-8c731470db5d" target="_blank" rel="noopener">NGFS Glasgow Declaration of November 3, 2021</a>, FINMA&#8217;s press release highlights the following:
<ul>
<li>FINMA is strongly committed to continuing to implement the NGFS&#8217; key recommendations and to include the integration of climate-related financial risks in its supervisory activities in a strategic, proportional and risk-based manner. FINMA, for example, states that it:
<ul>
<li>develops concepts to adequately supervise climate risk management by banks and insurers, and it expects these concepts to be implemented starting 2022;</li>
<li>engages in a dialogue on the proper management of climate-related financial risks and on developing «heat maps» to identify climate-related risks;</li>
<li>explores quantitative methods to measure climate-related financial risks together with the Swiss National Bank;</li>
<li>implemented specified disclosure requirements for climate-related financial risks in line with the recommendations of the Task Force on Climate-related Financial Disclosures; and</li>
<li>actively supports the Swiss Federal Offices in the implementation of NGFS&#8217; recommendations.</li>
</ul>
</li>
<li>FINMA is also addressing the risks of clients being deceived by exaggerated or misleading ESG claims, including in connection with investment products.</li>
</ul>
On the last point, FINMA simultaneously issued Guidance 05/2021 «Preventing and Combating Greenwashing». Therein, FINMA notes the growing demand for ESG products and the resulting growing number of financial products being labelled – or claiming to be – sustainable, green, social, etc. FINMA warns that there may be a risk that investors are misled about the true characteristics of the relevant financial products and services. In addition to the need to protect individual investors, FINMA also emphasizes the need to protect the reputation of the Swiss financial centre as a whole.
Guidance 05/2021 mainly focuses on three aspects: (1) descriptions/labels of Swiss collective investment schemes as being sustainable/green/ESG and whether these characteristics are actually ensured and appropriately disclosed; (2) additional organizational requirements for institutions that manage sustainability-related collective investment schemes, including adequate processes, expertise, strategies and tools; and (3) conduct at the point of sale for ESG-related financial products.

FINMA on Green Financial Centre and Greenwashing

Corporate / M&A

Financing and Investment Products

On May 31, 2022, Kering completed the sale of Sowind Group SA, which owns the Swiss watch manufacturers Girard-Perregaux and Ulysse Nardin, to Sowind&#8217;s management.
Homburger advised Kering on the transaction. The Homburger team was led by partner Dieter Gericke and included associates Léonard Aeschlimann and Angela Oppliger (all Corporate/M&amp;A), partner Jürg Frick (Financing and Investment Products), partner Stefan Oesterhelt and associate Laetitia Fracheboud (both Tax).

Homburger advised Kering on the sale of the Swiss watch manufacturers Girard-Perregaux and Ulysse Nardin

Financial Market Regulation

IFLR1000

IFLR1000 has released the first of three groups of rankings that represent IFLR1000&#8217;s 32nd edition and has ranked Homburger Tier 1 in both categories «Banking and finance» and «Financial services regulatory».
IFLR1000 undertakes qualitative research into law firms and lawyers to inform the publication of annual rankings, ratings and awards, and editorial content. The company remains the only international legal market research brand focused on ranking law firms and lawyers on the basis of financial and corporate transactional work.

IFLR1000 releases first of three groups of rankings and ranks Homburger Tier 1 in the categories «Banking and finance» and «Financial services regulatory»

Capital Markets

Sonova

On May 2, 2022, Sonova Holding AG successfully placed CHF 450 m Bonds. The Bonds are governed by Swiss law. Application will be made for the Bonds to be listed on the SIX Swiss Exchange. The Bonds will be issued in two tranches, the first tranche with a duration until 2029 and a coupon of 1.050% and the second tranche with a duration until 2032 and a coupon of 1.400%.
Homburger advised Sonova with respect to all Swiss law aspects of the transactions. The Homburger team was led by partner Jürg Frick (Financing and Investment Products) and included counsel Eduard De Zordi (Capital Markets).

Homburger advised Sonova on issuance of CHF 450 m Bonds 

We have longstanding experience with international financing transactions, including syndicated lending and acquisition financing, asset financing, export financing, real estate finance and financial restructurings financing. Our core competencies include:
<ul>
<li>Syndicated, secured and unsecured loan financing</li>
<li>Acquisition and export financings as well as financing of real estate transactions</li>
<li>Asset financing, including covered bonds and securitizations</li>
</ul>

Financing Transactions

We lead the way when it comes to developing and documenting investment products, including complex and customized structured products. Our core competencies include:
<ul>
<li>Developing and documenting of structured products</li>
<li>Advising Swiss and international private equity, hedge fund, and other fund managers on the structuring and distribution of funds</li>
<li>Developing and obtaining all authorizations for innovative investment products</li>
</ul>

Financing and Investment Products

Financing Transactions

Investment Products

Main Contacts

Reform of withholding tax and stamp duty

SIX Enables SPAC Listings as of December 6, 2021

FINMA on Green Financial Centre and Greenwashing

Homburger advised Kering on the sale of the Swiss watch manufacturers Girard-Perregaux and Ulysse Nardin

IFLR1000 releases first of three groups of rankings and ranks Homburger Tier 1 in the categories «Banking and finance» and «Financial services regulatory»

Homburger advised Sonova on issuance of CHF 450 m Bonds

SIX publishes revised notice regarding the fulfilment of the disclosure obligations in capital increase transactions and simplified disclosure of lock-up groups

Auftragsrecht ohne Grenzen?

Das Leben mit der neuen Struki-Regulierung