Tax In Distressed Situations Switzerland

GENERAL

1. Does debt have a specific meaning for tax purposes?

Debt does not have a specific definition for Swiss tax purposes, which would differ from its interpretation under Swiss commercial law. However, due to the various forms of debt, different Swiss tax implications can arise depending on the specific type of debt, such as loans, bonds, or term notes, including, for instance whether or not the debt and respective interest payments could potentially lead to Swiss stamp duty and withholding tax consequences.

In addition, recent developments indicate that the Swiss tax authorities are increasingly scrutinizing whether intra-group debt qualifies as a loan from an economic perspective, which must be interest bearing. This is particularly relevant for debt receivables at the level of a Swiss entity, as interest income must be recognized in the P&L.