In the past, the Swiss VAT risks associated with the acquisition of assets and liabilities (asset deal) remained with the seller, unless all assets and liabilities were transferred and the transferring entity ceased to exist with the transaction (and few other exceptions). The buyer of the assets and liabilities was thus “protected” and did not have to concern about the historical VAT risks of the business acquired by means of an asset deal. This in contrast to a share deal, where the shares in the company and thus the whole ""VAT history"" of the company were acquired.
With the new Decisions, the Court has modified the previous confirmed practice. According to the Decisions, it should be assumed that in the case of an asset deal, the VAT risks of the acquired business are transferred to the buyer (partial tax succession), even if the selling legal entity continues to exist and continues to carry out its operations.
The Swiss VAT Administration has now published the first draft of its corresponding practice specification. According to the first draft, the VAT risk is transferred to the buyer in the following constellations:
In the case of the sale of a part of a business to a third party, the VAT risk is not transferred to the buyer.
The rules set out in the draft practice specification provide clarity and are particularly good news for the sale of a part of a business to a third party. However, when selling a business to a third party, the VAT history must be reviewed, documents must be passed on to the buyer and new contractual clauses must be defined. The logic of the rules is not absolutely clear. However, it seems that the Swiss VAT Administration intends to follow a pragmatic approach but introduces a kind of an avoidance rule for the transfer of parts of a business to related parties.
The next step is that the interested parties have the opportunity to give feedback to the Swiss VAT Administration on the first draft, and then the final practice specification will be published with the second draft later this year. Please contact us should you have any questions.
