Author: Marcus Altenburg, Goldblum and Partners AG
Foreign investors entering the Swiss market sometimes acquire an existing shelf or shell company: a company already in the commercial register, with an established bank account, ready for immediate use. These transactions, however, carry both corporate-law and tax risks — and the two do not always overlap.
I. What Is Now Void Under Company Law
With the entry into force of the Federal Act on Combating Abusive Bankruptcy on 1 January 2025, longstanding case law and practice on shell company transactions were codified in Articles 684a and 787a of the Swiss Code of Obligations.
The new statutory nullity does not apply to every dormant or wound-down company. It applies where the target cumulatively lacks ongoing business activity, lacks realisable assets, and is overindebted. All three conditions must be met for the transfer of shares to be void. A shelf company — newly incorporated, with intact equity and no operational history — remains outside the scope of the prohibition.
Commercial register offices now screen for indicators of suspect transactions under Article 65a of the Commercial Register Ordinance. Simultaneous or successive changes to the company’s purpose, registered office, name, or board composition may raise a justified suspicion. Where such suspicion exists, the register may require submission of the signed annual financial statements and, where applicable, an audit report.
II. What Can Still Be Attacked for Tax Purposes
Even where a transaction falls outside the statutory nullity — because the company retains some assets, or is not technically overindebted — the tax authorities may still deny it the benefit of continuity.
Loss carryforwards. Under longstanding Swiss tax practice, a classic shell-company transfer may be treated as a discontinuity akin to liquidation followed by recommencement. Historic loss carryforwards — ordinarily available for seven years — are treated as extinguished upon transfer. The buyer acquires an existing legal vehicle, but none of the tax attributes. Depending on the facts, if the new owners apply extinguished loss carryforwards against taxable income, the Federal Tax Administration (FTA) may treat the offset as giving rise to a withholding tax liability at the statutory rate of 35%.
The grey zone. Many Swiss GmbHs and AGs sit in a space formally outside Article 684a CO — perhaps with a nominal bank balance, not technically overindebted — but having ceased operations years ago. The tax authorities are not bound by the three cumulative criteria of the corporate-law nullity provision. They apply their own substance-based assessment: did the company conduct real business activity? Were there genuine operating assets? Was there an economic rationale beyond acquiring the existing legal vehicle?
Internal buyouts. The same analysis applies where an existing shareholder buys out a co-shareholder in a dormant company. The commercial register may not flag the transaction — no simultaneous changes to the board, purpose, or registered office means the indicators under Article 65a HRegV are unlikely to trigger. But cantonal tax authorities will assess the substance independently.
Partially paid-in share capital. A distinct risk arises with companies whose share capital was never fully paid in. Swiss law requires that upon incorporation of an AG, at least 20% of the nominal value of each share must be paid up, and in any case not less than CHF 50,000 in total (Article 632 CO). When non-fully-paid registered shares are transferred, the acquirer assumes the obligation to pay up the outstanding amount upon entry into the share register (Article 685 CO). In an internal buyout, the remaining shareholder may find themselves holding shares that carry an unpaid capital call from the departed co-shareholder. If that call becomes uncollectible, the balance sheet deteriorates at the moment of transfer — potentially tipping the company into overindebtedness within the meaning of Article 725b CO and materially increasing the risk of a Mantelhandel analysis for tax purposes.
Old reserves. Even where the target is solvent and operational, a cross-border share deal can trigger withholding tax exposure through the FTA’s old reserves practice (Altreservenpraxis). As a matter of established FTA practice, where a change of ownership results in the new shareholder having a more favourable withholding tax refund position than the predecessor, the FTA may maintain the predecessor’s withholding tax profile on pre-existing distributable reserves. These tainted reserves are typically worked off on a first-in-first-out basis, meaning the new shareholder’s own treaty entitlements apply only after the pre-sale reserves have been fully distributed. Pre-closing dividends or a corresponding purchase price adjustment are common mitigation tools.
III. Transaction Taxes
The transfer of shares in a Swiss company triggers securities transfer tax (Umsatzabgabe) at 0.15% of the transaction value if a Swiss securities dealer participates as a party or intermediary. The definition of “securities dealer” is broad: it includes any entity holding taxable securities with a book value exceeding CHF 10 million. Group holding companies may qualify, depending on their balance sheet holdings in taxable securities.
Share deals are not subject to VAT as such. In rare cases, however, a transaction may be recharacterised as a transfer of assets rather than equity, making VAT at 8.1% potentially relevant depending on the reporting procedure under Article 38 MWSTG.
IV. Transaction Hygiene
Full due diligence on the target. Review financial statements, tax filings, and open assessments. Hidden liabilities — back taxes, unpaid social security contributions (with personal subsidiary liability for directors under Article 52 AHVG), outstanding VAT assessments — all transfer with the shares. Verify the actual liberation status of share capital against the commercial register entry.
Quantify the withholding tax exposure. Map the target’s distributable reserves, identify the seller’s treaty position, and model the potential cost under the old reserves practice.
Treat internal buyouts with the same rigour as third-party acquisitions. The tax authority will assess the substance independently, regardless of the commercial register outcome.
Consider incorporation instead. Swiss company formation is efficient. An AG or GmbH can be incorporated within days. The marginal time saving from acquiring a shell rarely justifies the tax and legal risks.
Conclusion
The 2025 codification has drawn a clear corporate-law line: share transfers in companies that cumulatively lack business activity, realisable assets, and solvency are void. But the tax risks extend well beyond the statutory nullity. Companies that fall outside Article 684a CO — formally solvent, formally not void — may still lose their loss carryforwards, face withholding tax exposure and, depending on the structure, trigger transaction taxes. For most foreign investors, a clean incorporation remains the safer route.
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Marcus Altenburg is the Managing Partner of Goldblum and Partners AG, a corporate and regulatory law firm with offices in Zurich and Zug. The firm advises international clients on Swiss company formation, licensing, M&A, and cross-border structuring.
