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The Tax Consequences of a Sale of Shares – Recent Developments in Connection with Indirect Partial Liquidation

July 2006

The indirect Partial Liquidation, which takes place upon the sale of shares from an individual to a corporation is among the most controversial issues in the Swiss Taxation. A number of share deals failed in the last years due to the restrictive practice of the Tax Authorities, or did they trigger unexpected tax consequences. The new legislation on the Indirect Partial Liquidation, relevant for the first time during the 2006 summer session by the Swiss parliament is therefore to be welcomed. The new regulations will bring an enhanced legal clarity. However, the concept of Indirect Partial Liquidation has not been abolished, but merely limited. It will therefore have to be taken into consideration upon each future share deals.

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