Swiss securities transfer tax - Swiss Federal Administrative Court rules on the concept of “intermediary”

In the decision A-1480/2019 dated 9 June 2020, the Swiss Federal Administrative Court had to decide on the Swiss securities transfer tax liability of a Swiss resident group holding company in connection with its activities as intermediary in a group transaction.

1 Facts

• Subject to tax was the Swiss resident group holding company (Swiss HoldCo) of C-group, who undisputedly qualified as securities dealer under the Swiss Stamp Tax Act.
• In connection with the acquisition of a group external entity domiciled in the US (A Inc.) via a US registered acquisition company newly established for this purpose, which had later dissolved by way of a reverse merger (B Inc., indirect subsidiary of Swiss HoldCo), Swiss HoldCo acted – according to the court – as intermediary for the purpose of the Swiss securities transfer tax.

2 Considerations of the Swiss Federal Administrative Court

• Definition of the term “intermediary” for securities transfer tax purposes on the basis of the law (art. 13 para. 1 in connection with art. 17 para. 3 Swiss Stamp Tax Act): Not the legal form but rather an economic view of the intermediary activities is decisive for the qualification as intermediary. It must be assessed whether a company – without itself acting as either buyer or seller of the securities – may contribute to the success of a transaction in a way that makes it appear to be part of the transaction chain between the two contracting parties. The intermediary’s involvement must therefore be causal for the transaction.
• According to the documentation (agreements, e-mail correspondence, press releases), Swiss HoldCo had been involved in every step of the acquisition, acting through its bodies and authorized signatories. Swiss HoldCo’s name appeared on various (preliminary) agreements and it also signed them in its own name.
• Swiss HoldCo’s contribution to the realisation of the acquisition appeared to be considerable. In particular, Swiss HoldCo had independent rights and obligations as a party in connection with the transaction and even “caused” B Inc. to take certain actions.
• Various individuals were simultaneously authorized to sign for several group companies and, in particular, also for Swiss HoldCo. The court had given particular attention to this fact in its assessment of the documents.

Based on the above, the Swiss Federal Administrative Court ruled that Swiss HoldCo was liable for Swiss securities transfer tax of 0.3% on the purchase price due to its activities as an intermediary in the respective transaction. With its decision the Swiss Federal Administrative Court has clearly set up a hurdle for the involvement of Swiss holding companies in the securities purchase and sale transactions of their group companies. It is to be expected that the Swiss Federal Tax Authorities will scrutinize these transactions more closely in the future.