Buying a Swiss Shell Company?
Mind the Tax Traps

Foreign investors entering the Swiss market sometimes consider acquiring an existing shelf or shell company rather than incorporating from scratch. The appeal is understandable: a company already in the commercial register, with an established bank account, ready for immediate use. In practice, however, these transactions carry risks on two distinct levels — corporate-law invalidity and adverse tax consequences — and the two do not always overlap.

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 for the last completed financial year and, where applicable, an audit report — but this is not automatic in every case and does not invariably require audited accounts.

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.

Under longstanding Swiss tax practice, a classic shell-company transfer may be treated as a discontinuity akin to liquidation followed by recommencement, with the result that historic loss carryforwards are denied. Under ordinary Swiss tax law, losses can be carried forward for seven years. But where the tax authorities identify a Mantelhandel, any accumulated losses of the target are treated as extinguished upon transfer. The buyer acquires an existing legal vehicle, but none of the tax attributes.

Depending on the facts, the denied offset may also trigger Swiss withholding tax consequences. If the new owners apply extinguished loss carryforwards against taxable income without appropriate adjustments, the Federal Tax Administration (FTA) may treat the offset as giving rise to a withholding tax liability at the statutory rate of 35%; in abusive constellations, a refund claim may be refused.

This matters because many Swiss GmbHs and AGs exist in a space that is 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?

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 of the company independently. If it was dormant, the tax consequences follow regardless of whether the buyer was already inside the corporate structure.

A related but 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). The unpaid portion represents a receivable of the company against the subscribing shareholder.

A related but 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). The unpaid portion represents a receivable of the company against the subscribing shareholder.

When non-fully-paid registered shares are transferred, company consent may be required, and the board may refuse consent where the acquirer’s solvency is in doubt (Article 685 CO). The acquirer assumes the obligation to pay up the outstanding amount upon entry into the share register, while the original subscriber retains a residual exposure in insolvency settings (Article 687 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 precisely 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.

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).¹ 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.

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 — for instance where the target holds no genuine business but only isolated assets. Where this occurs, VAT at 8.1% may become relevant, depending on what is actually transferred and whether the reporting procedure (Meldeverfahren) under Article 38 MWSTG applies.

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 securities transfer tax or, in rarer cases, VAT issues. Foreign investors are better served by a clean incorporation with proper structuring from the outset.