Contact UsWe are a 50M US company considering moving our operations to Switzerland for many management reasons. What tax advice would you give us before making such a move?
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Tax Professional Answers
Harry-Todd Astrov
Assuming the U.S. entity (that I’ll call USCo) sells assets to a new Swiss entity (SwissCo), then USCo may have taxable capital gain (and U.S. income).
If both USCo and SwissCo are under the same control, then both U.S. and Swiss transfer pricing rules require the price to be arms-length. Arms-length means that the price is the amount that a third-party would pay for the assets under comparable circumstances.
However, if instead of selling the assets, USCo “contributes” them to SwissCo in return for stock in SwissCo (which ordinarily would be nontaxable), to the extent intangible assets such as intellectual property or customer contracts are transferred, then gain may still be recognized.
Also, if SwissCo has any activities or sales in the U.S. after the move, then SwissCo may be subject to U.S. tax. Thus, not only do you need to consider the transfer in your tax planning, but you need to consider the taxation of the continuing operations in your planning. Taxation of the continuing operations will depend on the nature of the business and how (and where) it operates and has customers.
You will also need to determine how the payments by SwissCo will be treated under Swiss tax law. Under some circumstances, the payments by SwissCo will be subject to Swiss withholding.
*These are high-level comments based on a general question and several assumptions. Much more specificity is needed to provide appropriate advice. This should not be considered legal advice and no attorney-client relationship is created by having offered this information.
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574 weeks ago
If both USCo and SwissCo are under the same control, then both U.S. and Swiss transfer pricing rules require the price to be arms-length. Arms-length means that the price is the amount that a third-party would pay for the assets under comparable circumstances.
However, if instead of selling the assets, USCo “contributes” them to SwissCo in return for stock in SwissCo (which ordinarily would be nontaxable), to the extent intangible assets such as intellectual property or customer contracts are transferred, then gain may still be recognized.
Also, if SwissCo has any activities or sales in the U.S. after the move, then SwissCo may be subject to U.S. tax. Thus, not only do you need to consider the transfer in your tax planning, but you need to consider the taxation of the continuing operations in your planning. Taxation of the continuing operations will depend on the nature of the business and how (and where) it operates and has customers.
You will also need to determine how the payments by SwissCo will be treated under Swiss tax law. Under some circumstances, the payments by SwissCo will be subject to Swiss withholding.
*These are high-level comments based on a general question and several assumptions. Much more specificity is needed to provide appropriate advice. This should not be considered legal advice and no attorney-client relationship is created by having offered this information.