Transfer Stamp Duty on M&A Transactions

The acquisition or sale of a company (share deal) is subject to the Swiss transfer stamp duty of 0.15% (domestic company) or 0.3% (foreign company) if a domestic securities dealer is involved in the transaction as a party or an intermediary.

The term «securities dealer» is defined in the Stamp Duty Act. In addition to domestic banks and brokers, domestic companies that hold more than CHF 10 m in securities (e.g., participations) according to their last balance sheet are also considered securities dealers. This also applies to holding and intermediate holding companies if they show participations with a book value of CHF 10 m.

Foreign companies, on the other hand, are not considered securities dealers. If a domestic group acquires a participation through a foreign subsidiary from a foreign counterparty, neither party is a securities dealer. The transfer stamp duty is therefore only due if a securities dealer is involved in the transaction as an intermediary.

Management Company as an Intermediary in an M&A Transaction

In addition to an investment bank, broker, or M&A boutique, a group company that is a securities dealer can also be an intermediary according to the practice of the FTA and the case law of the Federal Supreme Court. This is always the case when the negotiation in the M&A transaction is conducted by officers or employees of a group company that is a securities dealer.

If the group has a management company, the person responsible for the negotiation is usually employed by this company. The transfer stamp duty is therefore always due if this management company is a securities dealer.

If such a management company does not have securities (e.g., participations) with a book value of CHF 10 m on its balance sheet, it is generally not considered a securities dealer. This is different if the management company’s activities primarily involve acting as an investment advisor or asset manager to facilitate the purchase and sale of securities (so-called commercial intermediary).

In recent years, the Federal Tax Administration (FTA) has had a very extensive understanding regarding the question of when a management company is considered a commercial intermediary and thus a securities dealer. In the practice clarification dated November 1, 2024, the FTA adjusts this practice. From now on, intermediary activities for a group company do not result in a company being classified as a commercial intermediary and thus as a securities dealer. Therefore, group-owned management companies that have less than CHF 10 m in securities on their balance sheet will no longer be considered intermediaries.

This practice clarification by the FTA is very welcome. It eliminates the disadvantage for group companies where the M&A team is employed in a domestic management company compared to those with an M&A team based abroad.

Group Parent Company as Intermediary for the M&A Transaction

The group parent company is regularly a securities dealer for purposes of the transfer stamp duty because it holds participations with a book value of more than CHF 10 m. In its ruling of February 25, 2021, the Federal Supreme Court stated that the group parent company is always an intermediary in terms of the transfer stamp duty if it acts like a proof or intermediary broker.

In its practice clarification dated November 1, 2024, the FTA clarifies that there is particularly no proof or intermediary brokerage if the group parent company commissions an independent investment bank with a transaction (purchase or sale of a participation) and compensates it for this, or if the negotiations are conducted by a person who does not belong to the domestic holding company.

Thus, the domestic group parent company is also generally not considered an intermediary for M&A transactions. This clarification is also very welcome, as there has been some uncertainty in this regard since the Federal Supreme Court ruling of February 25, 2021.

Effective Date

The practice clarification of the FTA dated November 1, 2024, will be applied immediately and will apply to all currently pending open cases with the FTA. However, retroactive application is excluded.

Conclusion

Through the clarification of practice, it is possible for domestic corporations to continue concentrating their M&A activities in a domestic management company without this automatically leading to transfer stamp duty consequences for the acquisition and sale of participations, provided that the purchasing or selling company itself is not a securities dealer. This is particularly relevant with regard to the acquisition of participations in foreign companies, as these are usually acquired through foreign holding companies. This clarification is very welcome, as it eliminates the disadvantage for Swiss multinationals in international M&A activities.