Switzerland vs. Y Holding AG, May 2013, Federal Supreme Court, Case No. 2C_1086/2012

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A finance company registered in Guernsey was found to have effective place of management in Switzerland due to lack of functional substance in Guernsey.

The Swiss Federal Supreme Court stated that the effective place of management is to be distinguished from the activity of the Board of Directors and the General Assembly and from mere administrative activity, such as accounting. Thus, the effective place of management of a company is where the company has its economic center. Management of the ongoing business in the context of the purpose of the company is decisive, including the decisions made in relation to the core business.

According to the Federal Supreme Court, the only business of X Ltd was forwarding the start-up capital provided by Y Holding AG in the form of loans to Group companies. X Ltd activities in Guernsey were of a purely administrative nature, and in the exclusive interest of Y Holding AG. The decisions on the respective lending activities was made by the management of Y Holding AG in Switzerland.

The low rent of the business premises in Guernsey, low telephone costs, and just two part-time employees with low pay supported the fact that the effective place of management was located in Switzerland and not in Guernsey.

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Swiss case law 2C_1086-2012

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