News Value Added Tax

Additional VAT risk on company acquisition

A newly published ruling by the Swiss Federal Supreme Court has relativised the previous practice concerning the VAT risks associated with a company acquisition.


When a company is sold, a basic distinction is made between an asset deal (sale of assets) and a share deal (sale of shares).


In the case of an asset deal, individual assets of the company are sold (such as the customer base, individual assets and liabilities, existing contracts, etc.). In a share deal, the shares/capital stock of the company and therefore the legal entity is sold as a unit with all rights and obligations.


In a share deal, all liabilities and risks of a company (including the unknown) are transferred to the buyer. In an asset deal, the existing risks remain with the seller, or at least this was the opinion until now. In practice, the share deal was often preferred to the asset deal for tax and administrative reasons.


In a newly published ruling (2C 923/2018), the Federal Supreme Court has relativised the previously common practice with regard to the assumption of risks. According to this judgement, it must be assumed that the VAT risks of the purchased asset are transferred to the buyer in an asset deal (partial tax succession), even if the selling legal entity continues to exist and even continues to operate.


The impacts of the ruling have not yet been conclusively clarified. However, this decision means that in the future, any VAT-related risks should definitely be examined in advance, also in the case of an asset deal. If you have any questions, please do not hesitate to contact us.


Kathrin Kühn 5 June 2020