Global Insight | April 2025

Capital contribution principle – Leading decision of the Federal Supreme Court of 21 March 2025

In a landmark decision dated 21 March 2025, the Swiss Federal Supreme Court clarified key aspects of the capital contribution principle under Art. 5 para. 1bis VStG. The Court ruled that reserves from capital contributions can validly be disclosed in a separate account in the commercial balance sheet at a later date, rather than strictly at the time the contribution is made. It further confirmed that the reporting obligation to the Swiss Federal Tax Administration must be fulfilled by the time of repayment (e.g. distribution) in order to qualify for withholding tax exemption. This decision marks a significant shift from previous administrative practice and has implications for the timing and treatment of capital contributions – offering greater flexibility for businesses and potentially informing international tax approaches.