Elimination of the holding privilege by AHV tax proposal: General information

Due to the AHV tax proposal, which will be voted on May 19th, holding, domicile, and mixed companies will lose their special tax status and will be ordinarily taxed. The elimination of the so-called holding privilege, particularly the treatment of hidden reserves, is of interest. We are going to show you what options exist.

On May 19th, the public vote on the federal law concerning tax reform and AHV financing (STAF) takes place. With this proposal, the legislature responds to international developments in the area of corporate taxes and aims to improve the attractiveness of Switzerland as a business location. A central element of the tax proposal is the elimination of the holding privilege, which is currently found in Art. 28 ff. of the Federal Law on the Harmonization of Direct Taxes of the Cantons and Municipalities (StHG). Upon the acceptance of the STAF, effective from January 1st, 2020, the tax status of holding, domicile, and mixed companies would be abolished, and the tax exemption at the state and local levels as well as the separate capital tax rates for these companies would be eliminated. Due to the removal of the tax status, the treatment of hidden reserves when transitioning to ordinary taxation is particularly interesting. A holding company may have hidden reserves either in individual assets such as participations, securities, receivables, and intellectual property rights, or in self-created value (Goodwill). With the acceptance of STAF, a transition period of up to 5 years maximum will be introduced by the end of 2024, during which write-downs on hidden reserves formed under the old tax status and correctly identified according to the special rate regulation provided for in STAF can be made. Even the current law includes cantonal transition solutions for the relinquishment of the special tax status. However, as this so-called step-up differs from the special rate regulation of the STAF, it is advisable to compare the two methods with a view to tax optimization for the respective holding or mixed company. With the acceptance of STAF, the choice of a tax-optimized location for the companies will also gain importance, which was less decisive for the location choice in the current law. In addition, a corporate restructuring can also help to save costs and create fiscal planning scope. In the second article on the topic "Elimination of the Holding Privilege by AHV Tax Proposal," we will explain to you the differences between the special rate solution of STAF and the step-up, through which a status change is already possible under the current law.

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