Switzerland: Real estate “step-up” now available in Geneva

Geneva tax authorities plan to publish an official notice or information relating to the conditions

Now available in Geneva

The Geneva cantonal tax authorities recently announced that a real estate company (société immobilière (SI)) may, under certain conditions, “step-up” its real estate assets when its shares have previously been sold and subject to tax, thus avoiding potential double taxation of capital gain on real estate.

The “step-up” approach is already accepted in many Swiss German cantons which apply a monist tax system, as well as in certain dualist cantons. It has also been validated in two decisions issued by the Federal Court.

Conditions for “step-up”

The “step-up” is subject to certain conditions:

  • Declaration of a latent reserve imposed on the SI’s real estate assets in determining tax accounts of the SI in terms of cantonal and communal taxes, submitted with the declaration of the tax period in which the transfer of the shares took place (i.e., no "retroactive" statement is allowed)
  • Effective deduction of a tax on real estate gains during the transfer of the shares of the SI
  • Validation of the “step-up” and the amount of the recommended latent reserve by transmitting all relevant information to the tax authorities

The Geneva tax authorities also plan to publish an official notice or information relating to the conditions for applying the “step-up.”

KPMG observation

The "step-up" will facilitate the transfer of shares of an SI since the purchaser can avoid taking over the latent tax due on the latent reserves previously constituted by the seller on Geneva real estate in the event of an asset deal. This same latent tax is also often the subject of negotiations between the parties since the purchaser will in principle not want to bear it in full.

In addition, some acquirers do not wish to maintain an indirect real estate holding and therefore often liquidate or merge the newly acquired SIs. One of the obstacles to this process is the disbursement of a latent tax on the latent reserves constituted on the buildings held by the SI.

Read a June 2022 report (French) prepared by the KPMG member firm in Switzerland


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