On June 18, 2023, the Swiss people approved a constitutional amendment that enables the Federal Council to introduce, on the basis of a temporary ordinance, the global OECD/G20 minimum taxation with a so-called Effective Tax Rate (ETR) of 15 percent for multinational groups with a consolidated annual turnover of 750 million euros or more in Switzerland. All other companies are not affected by this reform.
The Federal Council will adopt the OECD/G20 model rules by means of a static reference. The model rules are also to be interpreted in accordance with the associated OECD/G20 commentary and guidance. A federal law will subsequently be enacted in the ordinary procedure. While the Federal Council is authorized to introduce the minimum taxation as early as effective January 1, 2024, it is expected that Switzerland will likely follow the EU timetable, to the extent the latter caters for effectiveness in the EU member states at a later date. Separately, the minimum taxation already has a retroactive effect, as the transitional rules already apply to certain transactions on or after November 30, 2021.
Companies to which the new regime applies will be subject to comprehensive documentation and declaration obligations. The cantons will be responsible for assessing and levying the minimum tax. A so-called one-stop-shop is planned: The canton in which the economically most significant unit of the group is domiciled is tasked with levying the minimum tax for all units in Switzerland. For interpretive questions arising as part of the implementation, the cantons may turn to a working group consisting of representatives of the cantonal tax administrations and the FTA. Affected companies can check specific questions of interpretation with their competent canton.

Yes to OECD/G20 Minimum Taxation

Issues of domestic bonds continue to be subject to withholding tax. Thus, the transfer restrictions in syndicated loan agreements («10 and 20 non-bank rules») as well as restrictions on the use of funds of bonds issued abroad by Swiss groups remain relevant.
Trading in domestic bonds also remains subject to the turnover tax of up to 0.15%. The same applies to the purchase and sale of domestic and foreign qualifying participations.

No to reform of withholding tax and transfer stamp duty

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

Capital Markets

Financing and Investment Products

DWS_Logo_grey

Share-Image Teamplate Deals-and-Cases

On March 27, 2024, Swiss special purpose issuance vehicle Xtrackers Digital Markets ETC AG simultaneously launched two series of crypto-linked Exchange Traded Products (ETPs) under its program for the issuance of cryptocurrency-focused ETPs for professional and retail investors in Europe. The Xtrackers Galaxy Physical Bitcoin ETC Securities (XXBT) and the Xtrackers Galaxy Physical Ethereum ETC Securities (XETH) are listed on Deutsche Börse Xetra since April 4, 2024. State Street acts as the issuing and paying agent as well as the administration agent on these ETPs. XXBT and XETH are physically backed, and the underlying collateral is held through two cryptocurrency custodians: Zodia Custody and Coinbase.
DWS Investments UK Limited (DWS), a UK based asset manager, is part of DWS Group (being part of Deutsche Bank group) with EUR 896 bn of assets under management as of December 31, 2023. DWS is acting as arranger under the program and have partnered with US-based digital assets manager Galaxy Digital as crypto advisor and execution agent under the program.
Homburger advised DWS in this transaction with respect to aspects of Swiss law and regulations, including listing regulations. The Homburger team comprised Benjamin Leisinger, Philipp Klein and Alexander Wherlock (all Capital Markets and Investment Products) as well as Stefan Oesterhelt and Philippe Gobet (Tax).

Homburger advised DWS on Crypto ETPs

Homburger News

On October 6, 2023, UBS published the Base Prospectus for the establishment of its CHF 20 bn program for the issuance of Covered Bonds issued by UBS Switzerland AG and guaranteed by UBS Hypotheken Schweiz AG. The Covered Bonds issued under the program will be indirectly backed by a portfolio of mortgages from UBS Switzerland AG&#8217;s domestic mortgage pool.
On October 18, 2023, UBS Switzerland AG successfully completed its inaugural issuance of Covered Bonds under the program in an aggregate principal amount of CHF 820 m, consisting of CHF 350 m 1.820% Covered Bonds due October 2026 and CHF 470 m 2.035% Covered Bonds due October 2033. The Covered Bonds are governed by Swiss law and have been provisionally admitted to trading on SIX Swiss Exchange, and application will be made for definitive admission to trading and listing.
Homburger advised UBS Switzerland AG as issuer and UBS Hypotheken Schweiz AG as guarantor in respect of all transactional, regulatory and tax aspects of Swiss law. The Homburger team was jointly led by Benedikt Maurenbrecher and Stefan Kramer and included Daniel Hulmann, Daniel Junginger, Sofiya Shavlak and Mike Lerchmüller (all Capital Markets) as well as Stefan Oesterhelt and Philippe Gobet (both Tax).

Homburger advised UBS Switzerland AG on the establishment of its Swiss Covered Bond Program and the issuance of CHF 820 m Covered Bonds

Corporate / M&A

IP / IT

Competition

Regulatory

Employment and Executive Compensation

On July 13, 2023, Homburger received the «Impact Deal of the Year» award at the LMG Life Sciences Awards EMEA 2023 for its work on <a href="https://www.homburger.ch/en/news/homburger-advises-csl-with-respect-to-its-announced-public-tender-offer-to-acquire-vifor-pharma">CSL/Vifor</a>. Our team was led by partners Dieter Gericke and Daniel Häusermann. It also included members from our Tax, Financing and Investment Products, Competition and Regulatory, IP / IT, Corporate/M&amp;A, and Employment and Executive Compensation teams.
The awards aim to recognize complex and impactful work across an array of legal specialisms that operate within the life sciences industry.

Philippe
Gobet

Homburger advised DWS on Crypto ETPs

Homburger advised UBS Switzerland AG on the establishment of its Swiss Covered Bond Program and the issuance of CHF 820 m Covered Bonds

Homburger honored with LMG Life Sciences EMEA award for «Impact Deal of the Year»

Yes to OECD/G20 Minimum Taxation

No to reform of withholding tax and transfer stamp duty

Reform of withholding tax and stamp duty

Chapter 10: Accounting and Auditing

Reform of withholding tax and transfer stamp duty

Swiss Withholding Tax Reform

Join the Team

Philippe Gobet

Career

Languages

Teams

PhilippeGobet

Homburger advised DWS on Crypto ETPs

Homburger advised UBS Switzerland AG on the establishment of its Swiss Covered Bond Program and the issuance of CHF 820 m Covered Bonds

Homburger honored with LMG Life Sciences EMEA award for «Impact Deal of the Year»

Yes to OECD/G20 Minimum Taxation

No to reform of withholding tax and transfer stamp duty

Reform of withholding tax and stamp duty

Chapter 10: Accounting and Auditing

Reform of withholding tax and transfer stamp duty

Swiss Withholding Tax Reform

Join the Team

Philippe Gobet

Career

Languages

Teams

Philippe
Gobet