Update of Swiss tax treatment of collective investment schemes and their investors


The new Circular has been completely reworked from the previous version. In particular, all aspects relating to the Swiss tax reporting requirements of Swiss and foreign funds have been removed from Circular 25 (previously this was duplicated in both Circular 24 and 25).

Aside from this structural revision, most of the technical changes to Circular 25 reflect clarifications and confirmations of existing market practice. As a result, it is not expected that the revisions to the Circular will have any noticeable impact for most foreign asset managers. However, as explained in the following, the changes to the tax and accounting treatment of real estate / property funds will have an impact for certain funds.

The provisions of the new Circular 25 enter into force with immediate effect from its publication on 23 February 2018.

Key changes for investment funds

  • The minimum number of investors required in order for an entity to be considered as a “Collective Investment Scheme” for Swiss tax purposes has been reduced from five (under the previous version of the Circular) to two.

KPMG comments: The reduction in the minimum number of investors is welcome, and should make it easier for smaller fund vehicles to qualify for “Collective Investment Scheme” treatment for Swiss tax purposes. However, it should be noted that the investors must be “independent” for the purposes of the above test.

  • As an exception to the above requirement, the new Circular 25 confirms that single-investor funds may nevertheless also be treated as “Collective Investment Schemes” for Swiss tax purposes if the investor is exclusively either (i) a public corporation, or (ii) a pension fund with professional treasury operations.
  • The Circular clarifies that fund restructurings by means of a merger or legal entity conversion are tax-neutral when undertaken in accordance with the respective provisions of Swiss domestic fund legislation (contributions in kind and asset transfer remain not tax-neutral). The Circular also confirms that the same rules apply mutatis mutandis for foreign funds.

Key changes for real estate / property funds

  • For Swiss funds with direct ownership of real estate, the new Circular introduces the possibility to rely for Swiss tax purposes on financial statements in accordance with the Swiss Code of Obligations (OR) or – as in the past – in accordance with Swiss Fund Law (KAG). There is no requirement for financial statements according to OR to be audited. Funds relying on financial statements according to KAG will be required to recognize unrealized capital gains and losses for Swiss income tax purposes starting with the next closing date (i.e. after 23 February 2018).

KPMG comments: Funds that have not recognized unrealized capital gains for Swiss income tax purposes to date will need to change to the OR accounting to continue to not recognize unrealized capital gains for Swiss income tax purposes.

  • The Circular also clarifies that equalisation income recorded in the financial statements of real estate funds with direct ownership of real estate is to be treated as property income for Swiss tax purposes (and therefore subject to Swiss income tax).
  • Finally, various other smaller clarifications were made concerning the accounting treatment for real estate funds, including the requirement for provisions, depreciations and value adjustments to be posted separately for each property.

A copy of the new version of Circular 25 can be downloaded from the Swiss Tax Authorities’ website here (only available in German, French and Italian).

Please find another article on this topic on our expert blog (in German only).

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