Effects of STAF on holding companies

Corporate Tax, Tax Reform

Abolition of the holding company regime

Under current law, the holding regime has completely exempted holding companies from cantonal and communal income tax. Holding companies are companies whose investments or income from investments account for at least two-thirds of its total assets or income. At the federal level, qualifying investment income and capital gains from the sale of such investments benefit from the so-called participation exemption. Other income is subject to ordinary taxation at the federal level.

With the STAF, the holding regime will be abolished as of 31 December 2019. As a result, all profits of a holding company will be subject to cantonal and communal income tax from 2020 onwards (income from qualifying investments will continue to be subject to participation exemption).


Adjustment of income tax values

In general

Since depreciations on assets under the holding regime could not be claimed for cantonal and communal income taxes, the realization of hidden reserves created during the holding regime should not lead to a tax burden for the company after the abolition of the holding regime. The cantons generally follow this view.


«Step-up» on qualified shareholdings

When qualified investments are sold, the difference between the acquisition costs and a possible lower income tax value (re-captured depreciation) is subject to income tax. On the other hand, the amount exceeding the acquisition costs benefits from the participation exemption. To avoid income taxation on re-captured depreciation at the cantonal and communal level, it is possible to carry out a tax-neutral step-up of the income tax values up to the acquisition costs. If the market value of the qualifying shareholdings is lower than the acquisition costs, a tax-neutral step-up to the market value is possible. In this case, the acquisition costs are adjusted to the (lower) market value for cantonal and communal income taxes.

The fair value of qualified shareholdings is generally determined using the so-called “Praktikermethode” (see Circular Letter No. 28 of August 28, 2008; www.steuer-konferenz.ch; for now on "KS 28").



Hidden reserves are regularly disclosed as part of the income tax return filing for 2019. Hidden reserves are disclosed either based on a Federal Supreme Court decision made in 2012 or based on the STAF.

If hidden reserves are disclosed in the tax balance sheet based on the 2012 court decision, the corresponding amount is shown as a taxed hidden reserve in the tax balance sheet.

As a result, the taxed hidden reserve is subject to capital tax.

Based on STAF, the hidden reserves are only determined by a tax adminitration’s assessment. In principle, the STAF step-up does not effect tax balance sheet. As a result, the hidden reserves determined are not subject to capital tax.



On one hand, the disclosure of hidden reserves on qualifying investments will lead to income taxation of re-captured depreciation at federal level. On the other hand, if the step-up is waived, the difference between the lower income tax value and the respective acquisition costs is subject to income tax (re-captured depreciation) not only at the federal level but also at the cantonal and communal level, at the latest in the event of a sale of the qualifying investment.

Against this background, it should be examined on a case-by-case basis, whether it makes sense to disclose hidden reserves on qualifying investments.

October 2019 | Authors: Dr. Samuel Bussmann, Dr. Hagen Luckhaupt

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