Important Supreme Court ruling confirming tax-free step-up

The Federal Supreme Court on 18 February 2014 rendered an important ruling on the tax-neutral step-up of hidden reserves of a Geneva-based holding company. The hidden reserves had been created while the holding company enjoyed an income tax exemption under the cantonal holding company regime. After the company had changed its tax status into an ordinarily taxed company, it sold some of its assets at a considerable gain. In its corporate tax return, the company deducted losses from earlier periods from the realised capital gain and thus reported zero taxable profit.

The Supreme Court confirmed the approach taken by the Geneva Cantonal Tax Authorities and the cantonal courts that losses accrued during the period of the exempt tax status could not be deducted from profits realised after the corporate tax exemption had fallen away…

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