Switzerland Readies Guidance on Carried Interest

Before the entry into force in 2007 of Switzerland’s new Federal Act on Collective Investment Schemes (CISA), which introduced the Swiss limited partnership for collective investments (Swiss-LP),1 Switzerland never had an officially published practice on the treatment of distributed carried interest in the hands of fund managers for Swiss income tax purposes because the Swiss-LP was simply not foreseen under Swiss law.

Of course, the issue already existed before the introduction of the CISA — for example, in an international context where a Swiss resident person acts as a manager of a foreign limited partnership (LP) — but the need for a consistent and harmonized approach had not been identified as yet. Instead, the cantons were more or less free to rule on matters on a case-bycase basis. (...)