Interest Deductibility following a Debt Push Down – Federal Supreme Court 9C_606/2025
October 29, 2026
Switzerland
Switzerland
Switzerland
Facts
A. SA, a Geneva real estate company, was ac-quired by way of a leveraged buy-out (LBO). For this purpose, the acquisition vehicle C. SA took out a loan of more than USD 9.5 million from a foreign company. Following the acquisition, A. SA absorbed the acquisition vehicle by way of merger, as a result of which the loan liability was transferred to the target company (a so-called debt push down).
Following the merger, A. SA claimed the entire loan interest as a commercially justified expense. The Geneva tax administration only allowed the deduction of the interest attributable to the renovation of the property (23.64% of the loan), but not of the interest attributable to the acquisition portion (76.36%). The Administrative Tribunal of First Instance and the Cour de justice of the Canton of Geneva upheld the position of the tax administration. A. SA then appealed to the Federal Supreme Court.
Reasoning of the Federal Supreme Court
The Federal Supreme Court upheld the refusal of the interest deduction for the acquisition portion of the loan, relying on the following principles:
The commercial justification of expenses (Art. 58 para. 1 lit. b DBG) requires an objective causal connection between the expenditure and the business purpose of the company. The only actual activity of A. SA was the management of real estate. The acquisition portion of the loan served the acquisition of the company’s own shares by the new shareholders and was unrelated to its operating activities.
The periodicity principle (Art. 79 in conjunction with Art. 58 DBG) precludes an automatic transfer of deductibility: interest that was deductible at the level of the acquisition vehicle before the merger does not automatically retain that status after the merger. Deductibility must be assessed separately for each tax period.
The reference to the tax-neutral restructuring (Art. 61 DBG) and to the principle of universal succession does not succeed, since tax neutrality concerns the hidden reserves, not the ongoing determination of profit. There is no connection between the tax neutrality of a merger and the determination of taxable net profit under Art. 58 DBG.
With regard to the supplementary tax assessment, the Federal Supreme Court held that the absolute limitation period for the 2010 tax period had expired; the supplementary tax for that period was therefore set aside.
Practical Implications
The judgment clarifies at the highest judicial level that, in a debt push down, the deductibility of acquisition interest does not automatically pass to the target company. The decisive factor is the business activity actually carried on by the absorbing company. The Federal Supreme Court rejected the contrary view expressed in legal doctrine that deductibility must continue solely by virtue of universal succession.
Key Takeaways
Following a debt pushdown, the deductibility of interest on debt must be assessed on the basis of the actual business activity of the absorbing company and the periodicity principle; it does not continue automatically.
Where a debt pushdown is planned, an objective connection between the acquisition debt and the business activity of the target company must be demonstrated. Otherwise, the interest will not be allowed as a tax-deductible expense.
The materials on the Eversheds Sutherland website are for general information purposes only and do not constitute legal advice. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Eversheds Sutherland disclaims liability for actions taken based on the materials. Always consult a qualified lawyer for specific legal matters. To view the full disclaimer, see our Terms and Conditions or Disclaimer section in the footer. Eversheds Sutherland is a provider of legal and other services operating through various separate and distinct legal entities. For further information about these entities and Eversheds Sutherlands' structure please see the Legal Notice page of this website.