Real Estate Company Acquired – A CHF 600,000 Price Advantage on Deferred Taxes
Key facts
- Area
- Transaction & tax
- Structure
- Purchase of a property company (share deal)
- Hidden reserves
- CHF 6 m
- Deferred tax
- CHF 1.2 m
- Seller’s offer
- CHF 300,000 discount
- Result
- CHF 600,000 price reduction
Names, figures and details have been changed to protect confidentiality.
The sales brochure is well made. Three apartment buildings, 42 flats, hardly any vacancies, a solid yield. What is for sale is not the buildings but the company that owns them, for CHF 14 million. Daniela and Marc H. sold their business two years ago and have been looking for a steady investment ever since. The price looks fair. Before signing the letter of intent, they want a second opinion.
Two ways to buy the same buildings
Anyone buying properties held in a company has two options. In an asset deal, they buy the buildings directly. In a share deal, they buy the company’s shares and with them everything it contains: the buildings, the mortgages, the contracts and the history. For the seller, the share deal is almost always more attractive. As a private individual, the gain on selling shares is generally a tax-free capital gain.
For the buyer, the share deal has a downside that no brochure mentions. The company carries its properties at book values far below today’s market value. The difference is hidden reserves, and they carry a tax that nobody pays today but that falls due as soon as the buildings are sold or the company is wound up. Whoever buys the shares also buys this tax burden.
The current environment makes careful scrutiny more important than before. Under Basel III, investment properties are becoming more capital-intensive for banks. According to MoneyPark and Lucerne University of Applied Sciences, most of the banks surveyed charge a margin premium of up to 25 basis points for them. At the same time, according to CRIF, bankruptcies in the real estate sector rose by 57.2 percent in the first nine months of 2026. Not every company on the market is as clean as its brochure suggests.
What the books reveal
FiPAX starts with a tax due diligence. The three buildings are on the balance sheet at a combined CHF 13 million, while their market value is CHF 19 million. The hidden reserves therefore amount to CHF 6 million. At a tax rate of around 20 percent, this results in a deferred tax of CHF 1.2 million, which the buyer would take on.
The calculation is not done as a lump sum but building by building. Part of the hidden reserves comes from past depreciation, which would be taxed as profit on a sale. The other part is genuine appreciation, which is taxed differently depending on the canton and the holding period. Only this breakdown produces a figure that stands up in a negotiation.
What the CHF 19 million market value contains
The three properties in CHF million
FiPAXThe deferred tax only falls due on a later sale of the buildings or a liquidation. It is taken on with the purchase of the shares.
The seller, a 78-year-old entrepreneur who built up the portfolio over three decades, knows the issue. He offers a discount of CHF 300,000, a quarter of the deferred tax. More than that is not customary, his fiduciary lets it be known.
A find in the rent roll
Going through the leases, FiPAX notices a flat let well below market rent, for nine years, to the seller’s son. Tax authorities can treat such a benefit as a hidden profit distribution. For the years not yet finally assessed, there would be a risk of back taxes, and after the purchase that risk would sit in the company, in other words with the buyer.
The finding is no scandal, but it is leverage. It shows the seller that the buyer is looking closely, and it belongs in the contract, not in the price.
Doing the maths for both sides
Instead of haggling over the discount, FiPAX models both options, not only for the buyer but for the seller too. If the company sold the buildings directly, it would first have to pay tax on the hidden reserves. Whatever then flowed to the shareholder would be taxed again as a dividend. Selling the shares avoids both.
The calculation shows in black and white that even after a CHF 600,000 discount, the seller is considerably better off than with any asset deal. The share deal creates a tax advantage, and there is no reason why only one side should benefit from it. FiPAX therefore proposes splitting the deferred tax equally.
What the seller keeps after tax
Simplified calculation in CHF million
FiPAXA share deal avoids corporate profit tax and dividend tax. The private capital gain is generally tax-free.
The negotiation takes two meetings. The seller’s fiduciary checks the figures, finds no error and advises his client to accept. The seller agrees on one condition: his son may stay in the flat, at a rent that is gradually raised to market level. Daniela and Marc H. agree.
What the contract protects
The purchase price is only part of the deal. Just as important is who bears the risks from the time before the purchase. FiPAX negotiates a tax indemnity: should the tax authorities levy back taxes for years before closing, for example because of the reduced rent, the seller pays. On top of this come warranties on the condition of the buildings, the leases and the mortgages, secured by a two-year retention from the purchase price.
Discount for the deferred tax
Amounts in CHF
FiPAXWith solid figures, a quarter became a half.
The outcome
The purchase price falls by CHF 600,000 instead of the CHF 300,000 originally offered. The seller still achieves considerably more than with a direct sale of the properties and can settle his succession without dispute. The buyers know exactly what tax burden they are taking on and are protected against risks from the past.
A year after closing, Daniela and Marc H. restructure the company’s financing. The bank asks about the deferred taxes. This time the answer is already in their file.
Planning to buy or sell a real estate company?
Whether asset deal or share deal, price, tax and contract are linked. Negotiating them separately almost always leaves money on the table.
Talk to us before the structure is set in stone.
Out of respect for our clients’ confidentiality, names, figures and other details have been altered or are illustrative.