Sale of a Zurich real estate company with foreign shareholders

In the Canton of Zurich, real estate gains tax is levied on gains resulting from changes in ownership of real estate or shares in such. Legal transactions that have the same economic effect as a change of ownership with regard to the power of disposal over a property are treated in the same way as a change of ownership (§ 216 StG Kt. ZH).

The sale of a real estate company with Zurich real estate therefore generally triggers real estate gains tax. However, if the shareholders of the real estate company consist of a company abroad, the provisions of the double taxation agreements must also be taken into account.

If the real estate company to be sold is held by a company in Germany, for example, the rules under Art. 13 para. 1 DTA CH-D and Art. 6 para. 2 DTA CH-D apply. The double taxation agreement between Switzerland and Germany does not contain a special provision for the sale of real estate companies analogous to Art. 13 para. 4 OECD Model Tax Convention, which would allow taxation in Switzerland.

According to statements made by the tax office of the City of Zurich, the provisions of Art. 6 para. 2 DTA CH-D should be sufficient under the new practice in order to also include an economic change of ownership on the sale of shares in a real estate company under Art. 13 Art. 1 DTA CH-D and thus to tax the increase in value in the Canton of Zurich with the real estate gains tax. A special clause for real estate companies based on the OECD model convention is not necessary for this.

In practice, such constellations must therefore be agreed in advance with the relevant tax offices and recorded in tax rulings.