- The new accounting law is effective since 1 January 2013. However, due to transition rules, most companies apply it for the first time as of business year 2015 which is usually being closed these days/weeks.
- One of the main changes relates to the presentation of treasury shares (i.e. own participation rights). The new accounting rules require that treasury shares are presented separately as a negative item in shareholders’ equity (art. 959a para. 2 Swiss Code of Obligations, SCO). This provision also applies to treasury shares for which capital contribution reserves represented the freely disposable equity as a prerequisite for their acquisition in accordance with art. 659 para. 1 SCO.
- As you may recall, the capital contribution principle was introduced to the Swiss tax system by Corporate Tax Reform II and became effective 1 January 2011.
- On 9 September 2015 the Swiss Federal Tax Authorities have published Circular Letter No. 29a covering aspects of the capital contribution principle in the context of the new accounting rules. According to section 4.2.3 of this Circular Letter, treasury shares attributable to capital contribution reserves have to be presented as negative item within the statutory capital reserve in order to qualify for a favorable tax treatment (i.e. no income tax and withholding tax consequences upon the cancelation of the participation rights or in case of an expiry of the deadlines referred to in art. 4a of the Swiss Withholding Tax Act).
- These different views on how to present treasury shares attributable to capital contribution reserves – accounting view: separate negative item as the last line item within shareholders’ equity versus tax view: negative item within the statutory capital reserve – would have led to a contradictory result. In order to resolve the issue, EXPERTsuisse liaised with the Swiss Federal Tax Authorities and an acceptable presentation of treasury shares attributable to capital contribution reserves has been agreed. The agreed solution is published in German and French in the members-area of the EXPERTsuisse website (cf. <Fachexpertise/Fachliche Verlautbarungen/Q&A/Q&A New Accounting Law (01-2016)>, pages 24 – 26). Further, the Swiss Federal Tax Authorities have published on 18 January 2016 a summarized version in German, French and Italian as new attachment 2 to Circular Letter 29a (cf. https://www.estv.admin.ch/estv/de/home/direkte-bundessteuer/dokumentation/kreisschreiben.html).
- In a nutshell, the amount of treasury shares attributable to capital contribution reserves is contained in “Statutory capital reserve/Reserves from capital contributions” and as negative item presented under “Own participation rights against reserves from capital contributions”.
- For your convenience, please find below a comparison between the presentation of treasury shares attributable to capital contribution reserves under the former and the new accounting law (the latter according to the solution as agreed with the Swiss Federal Tax Authorities). The example is based on the following assumptions:
- At the date of acquisition of the treasury shares, the company had sufficient capital contribution reserves which had been allocated to this transaction.
- The entire amount of capital contribution reserves is allocated to treasury shares (there is no residual amount of capital contributions reserves).
- Should a company for example dispose over a total amount of capital contribution reserves of 120, of which 80 were according to the former accounting law reflected under “Reserves from capital contributions” in the section “Legal reserves” and 40 were reflected under “Reserves from capital contributions” in the section “Reserves for treasury shares”, these capital contribution reserves of 120 would under the new accounting law have to be presented as follows:
- Line item: “Reserves from capital contributions” in section “Statutory capital reserve” would have to show 120. Line item: “Against reserves from capital contributions” in the amount of – 40 in section “Own participation rights” would remain unchanged.
- It should be noted that from a Swiss tax authorities perspective, it is important that all “Reserves from capital contributions”, i.e. the full 120, are presented in one single line item in the section “Statutory capital reserve” (i.e. the Swiss Federal Tax Authorities do not allow sub-accounts).
- Please liaise with your main PwC contact persons in relation to the preparation of your accounts and in particular to the presentation of your treasury shares attributable to capital contribution reserves or directly contact the persons below.
Tax & Legal Services
Office: +41 58 792 44 82
Main: +41 58 792 44 00 email@example.com PricewaterhouseCoopers AG Birchstrasse 160 | Postfach |
|Dr. Remo Küttel
Tax & Legal Services
Office: +41 58 792 68 69
Main: +41 58 792 68 00 firstname.lastname@example.org PricewaterhouseCoopers AG Grafenauweg 8 | Postfach |
|Dr. Sarah Dahinden
Tax & Legal Services
Office: +41 58 792 44 25
Main: +41 58 792 44 00 email@example.com PricewaterhouseCoopers AG Birchstrasse 160 | Postfach |