Financial Restructuring: Mind The Tax Traps

Companies undergoing financial restructuring often focus on balance sheet repair and liquidity preservation. Yet the tax consequences of restructuring measures can be just as significant as their corporate law effects. Depending on how contributions, debt waivers or recovery rights are structured and recorded in the accounts, the same economic outcome may trigger different consequences for corporate income tax, issuance stamp tax and capital contribution reserves.

With Circular No. 32a, the Swiss Federal Tax Administration ("SFTA") has comprehensively revised its administrative practice for the first time in many years and aligned it with recent case law. Numerous clarifications concern key restructuring instruments such as debt waivers, capital contributions and recovery certificates and restructuring dividend rights certificates. Companies should take these developments into account at an early stage when planning restructurings. Particularly in the case of financial