Cross-border restructuring

The legal field around restructurings and conversion of companies is complex, especially because due to the aspect that corporate and tax law have to be harmonized for a successful restructuring. In the following article, you will learn what needs to be taken into account, especially in cross-border restructurings, and how we can support you in this process. The present article deals with restructurings between Switzerland and Liechtenstein. Information on other countries will be provided on an individual basis.

What are restructurings anyway?

Corporate restructurings include mergers, demergers, but also conversions from one type of company to another. The relocation of functions, i.e. the transfer of the place of production or the generation of sales, also count as restructuring in a broader sense. Changes of this kind can have tax consequences, which should be analyzed and evaluated in advance in order to avoid problems and additional burdens afterwards and to find the optimal solution for you.

The legal situation in cross-border restructurings

In Liechtenstein as well as in Switzerland, the restructuring of your company is tax-neutral under certain conditions. In the tax law of the Principality of Liechtenstein this is in particular article 52 in the tax law, in Switzerland it is article 19 DBG or article 8 paragraph 3 StHG for income taxes and article 61 DBG or article 24 paragraph 3 StHG for profit taxes. In addition, there are separate articles on various types of taxes, such as stamp duty and value added tax. Accordingly, restructurings are tax-neutral if the previously applied profit tax values are maintained and two companies result from a demerger. Thus, taxation of hidden reserves is avoided until the assets are sold or the company moves out of the jurisdiction.

When can these rules cause challenges?

When it comes to the contribution in kind of investments, the retroactive demerger of your company or the indirect tax liability in the case of an investment spin-off, the legal regulations of Switzerland and Liechtenstein differ. Even if the basic system of both countries is the same, there are differences in the implementation. These are usually based on other differences in tax law and represent the real challenge in the cross-border restructuring of your company. Therefore, expert advice is indispensable at this point, especially because in the majority of cases not only one of the countries involved in the restructuring has special features.

The most important facts at a glance:

  • Tax-neutral restructurings are intended to prevent taxation of hidden reserves at the time of restructuring.
  • Each country has its own rules on restructurings, which may differ from each other. An early review of these rules is therefore essential.
  • In addition to income and revenue taxes, other taxes such as sales taxes and transaction taxes (stamp duties) must also be taken into account. In some countries there are also other special taxes.
  • Obtaining binding advance tax rulings provides legal certainty and is recommended in most cases.