SFTA PRACTICE IN CONNECTION WITH BONDS ISSUED ABROAD WITH A GUARANTEE OF A SWISS GROUP COMPANY

On February 5th 2019, the Swiss Federal Tax Administration (SFTA) published an important communication on its practice in connection with bonds issued abroad with a guarantee of a Swiss group company. In short, it alleviates the restrictions relating to the use in Switzerland of funds obtained by a foreign bond issuance. Up to the total amount of the equity of the foreign subsidiaries of the group, these funds can be lent to Swiss companies without a requalification of the foreign issuance as a Swiss bond. In addition, loans made by Swiss companies to foreign group companies is also taken into account to compute the amount that can be repatriated in Switzerland without adverse Swiss tax consequences.

The practice of the SFTA in connection with foreign bonds guaranteed by a Swiss parent does not rely on a clear legal basis. But it represents an important issue for all groups that need to finance themselves on international markets and face restriction on the use of these funds in Switzerland. The practice published on February 5th, 2019 is therefore an important step in the right direction that will help to reduce the incentive for Swiss group to invest abroad.