Navigating the EU Foreign Subsidies Regulation: Implications for Swiss Companies

September 25, 2023

AGN EMEA Tax Committee News.

On October 12, 2023, the European Foreign Subsidies Regulation (FSR) will take effect, impacting Swiss companies and foreign entities operating in Switzerland.

The FSR introduces notification requirements for large business transactions and public procurement, containing a broad definition of subsidies, including tax benefits, grants, loans, and guarantees. As the deadline approaches, Swiss businesses must prepare for compliance.

Understanding the European Foreign Subsidies Regulation (FSR)

The FSR is the EU’s response to concerns that foreign subsidies might distort competition. Even though Switzerland is not an EU member, its economic ties make it a focal point for this regulation.

Key Points of the FSR:

Notification Obligations: The FSR requires notification to the European Commission when foreign subsidies are involved in substantial business transactions or public procurement. This applies to mergers, acquisitions, joint ventures, and public contracts above specific financial thresholds.
Broad definition of subsidies: The FSR defines subsidies broadly to include various financial advantages. This inclusiveness ensures transparency and prevents distortion of competition.

Implications for Swiss Companies

Swiss companies and foreign groups in Switzerland need to consider these implications:

Compliance: Compliance with the FSR means identifying and reporting foreign subsidies in transactions. Companies must establish procedures for this, ensuring that they meet the regulation’s requirements.
Transparency: The FSR will increase transparency in business transactions. Companies must provide detailed subsidy-related information in large deals or public procurement, which may lead to increased analysis.
Legal Consequences: Non-compliance risks heavy fines and invalidation of transactions. Swiss companies must rigorously comply with the FSR’s notification obligations.
Business Adaptation: Firms may need to re-evaluate funding sources and subsidy reliance to comply with the FSR. Adapting to new financial structures may be necessary.

Conclusion: The European Foreign Subsidies Regulation (FSR) presents a transformative change in Switzerland’s regulatory landscape. With the deadline approaching, Swiss companies need to prepare diligently. This includes establishing robust processes for identifying and notifying foreign subsidies, maintaining transparency, and mitigating legal risks. By doing so, Swiss businesses can navigate the FSR’s complexities, ensuring continued success in a competitive global market.