The FTA has made significant practice changes and clarifications to the notification procedure, which have a particular impact on real estate transactions. The aim of this article is to categorise the new regulations and highlight their implications. The changes in practice enter into force upon their publication on 11 February 2025, provided they work in favour of taxpayers – possibly with retroactive effect for all tax periods that are not yet legally binding. If not, they take effect for taxpayers from 1 July 2025, i.e. for the 3rd quarter of 2025, which must be settled by 30 November 2025.

Practical changes to the notification procedure for property transactions

When transferring developed properties, taxable persons can choose between sale without option, sale with option or transfer using the notification procedure. However, this freedom of choice no longer applies if the notification procedure is mandatory. The latest changes in practice therefore raise key questions: How do the changes affect property transactions? When is the notification procedure mandatory? What are the consequences for the voluntary notification procedure?

Extension of the mandatory notification procedure

The taxability of the transfer is no longer a prerequisite for the mandatory application of the notification procedure. This means that the transfer of individual properties is now also subject to the mandatory notification procedure, provided that the other requirements of Art. 38 of the VAT Act are met.

All tax-neutral reorganisations in accordance with Art. 19 and 61 DBG are now subject to the mandatory notification procedure, even the absorption of a company that only holds one or more properties. This restricts the freedom of choice and forces the acquiring party to obtain the documentation on the input tax utilisation from the period prior to the restructuring from the acquiring party in order to avoid unpleasant surprises in the event of future changes in use.

For other restructurings, the FTA now expressly refers to the definition of a business in accordance with FTA-Circular 5a Restructurings (KS 5a) as a practical clarification. This means that for market value transactions, e.g. in the case of formation, liquidation, sale of a business or reorganisations under the Merger Act, the notification procedure for real estate is only mandatory if a real estate business is transferred or the real estate is part of another business within the meaning of KS 5a. In practice, this can lead to legal uncertainty, as the criteria for a “real estate business” can be interpreted differently from canton to canton. For real estate that is not transferred as part of a business at market value, the options of transferring the real estate(s) with or without an option for VAT or in the voluntary notification procedure must be examined and implemented correctly in the contract.

Errors in the contractual implementation can only be corrected retrospectively to a very limited extent and, in the worst-case scenario, can lead to high VAT costs at the time of the transaction.

Formal simplifications to the voluntary notification procedure

If the requirements for the mandatory notification procedure are not met, it can be applied voluntarily, provided that both parties are liable for tax and a property or part of a property is transferred. The formal simplifications introduced by the FTA for the voluntary notification procedure should be emphasised positively: The notification procedure is accepted even without the mandatory reference in the contract, provided that the declaration is made on time with the enclosure of form no. 764 signed by both parties. This means that incorrect contractual arrangements can be corrected within a very limited time frame, namely within the settlement period for the period in which the transaction is entered in the commercial or land register, and tax consequences can be avoided. Unfortunately, this practical simplification is not yet reflected in the newly published edition of Form No. 764. If VAT is disclosed in the purchase contract, the voluntary notification procedure is excluded.

Further changes in practice

The other changes in practice range from the optional exclusion of non-essential assets, such as investment properties, from the mandatory notification procedure to the calculation of the market values to be entered in Form 764 for the transferred assets and the CHF 10,000 limit for transactions between third parties.

Conclusion

The changes in practice partly extend the scope of application of the mandatory notification procedure and partly restrict it. New demarcation issues arise. Every real estate transaction and reorganisation should therefore be carefully examined in advance for its VAT consequences. The most favourable option must be implemented precisely in the contractual agreement.

Britta Rehfisch looks forward to hearing from you if you have any questions.

Director
Diplom-Kauffrau
German and Swiss certified tax expert

+41 44 267 63 74

britta.rehfisch@adb.ch