Elimination of the holding privilege by OASI tax proposal: Step-up

The AHV tax template comes into force on January 1, 2020. Then, holding, domicile, and mixed companies lose their special tax status and will be taxed normally. When switching to ordinary taxation, there are two options for the treatment of hidden reserves: the special rate solution or step-up. Today we explain the step-up under old law.

On January 1, the cantonal tax privileges for holding, domicile, and mixed companies disappear. However, transition measures are intended to prevent over-taxation of previously privileged taxed companies. This is particularly relevant for the existing and yet untaxed hidden reserves. Two methods can be chosen for the change of status to prevent over-taxation: The step-up or the special rate solution proposed in the tax proposal. In this post, we explain to you the old-law step-up, also known as uncovering solution.

Step-up

Already under current law, holding, domicile, and mixed companies can make a status change. In most cantons, the disclosure of hidden reserves is possible when entering ordinary taxation. The disclosure of hidden reserves or the self-created added value (goodwill) occurs without commercial booking, but purely in the tax balance sheet. The taxed hidden reserves can then be depreciated in the following tax periods for tax purposes. The relief limitation results from the respective cantonal regulations or the generally valid depreciation rates. The extent of the allowed step-up and the allocation to individual assets and goodwill as well as the depreciation period can be confirmed by tax rulings, which, however, are also subject to spontaneous information exchange.

In the next post, we will explain to you how the special rate solution works.

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