Shares exchange | In Principle

Definition of exchange of shares

An exchange of shares is a transaction in which
a company acquires shares of another company from a shareholder of the other company in exchange for the company’s own shares, resulting in obtaining an absolute majority of the voting rights of the other company, or increasing the number of shares in the company if prior to the transaction it already held an absolute majority of the voting rights in the other company. Cash consideration, if any, may not exceed 10% of the par value of the company’s own shares, or if the shares have no par value, the market value of the shares.

Corporate income tax consequences

As a rule, the transaction is neutral from the perspective of income tax if (i) the transaction is conducted for valid economic reasons and (ii) the entities taking part in the transaction are subject to taxation on all of their income, wherever earned, in a member state of the European Union or the European Economic Area.

Indirect taxes (VAT, transaction tax)

An exchange of shares is not subject to VAT or the tax on civil transactions.

Conversion

Legal succession

The Tax Ordinance provides for universal succession, under which a converted company enters into all the rights and obligations of the entity in its previous legal form provided under tax law, including rights and obligations arising out of decisions issued under tax regulations.

Conversion from one form of capital company into another form of capital company does not result in loss of the right to use losses generated by the converted company.

Corporate income tax effects

As a rule, conversion from one form of capital company into another form of capital company is neutral from the CIT point of view. The converted company settles CIT under the principle of continuation.

Indirect taxes (VAT, transaction tax)

Conversion of a capital company is neutral from the point of view of VAT and the tax on civil-law transactions.