Swiss Federal Supreme Court rules on non-deductibility of interest in debt push-down structures

Introduction

Leveraged buyouts (LBOs) typically involve a newly incorporated acquisition vehicle (BidCo) that raises a combination of equity or equity-like instruments (such as preferred shares or shareholder subordinated debt) and third-party debt to finance the acquisition of a target company (TargetCo).

Given the absence of corporate income group taxation in Switzerland, interest expenses incurred at the level of BidCo cannot be offset against the TargetCo's taxable operating income. To align financing costs and operating income, practitioners work with (i) profit push-up or (ii) debt push-down mechanisms.

The Swiss Federal Supreme Court examined one such debt push-down mechanism in its decision 9C_606/2025 of 24 February 2026. The case concerned an immediate post-transaction downstream merger in which BidCo merged into TargetCo, transferring its acquisition debt to TargetCo.

Cantonal tax authorities have historically closely scrutinized debt push-down measures, in particular in the context of third-party transactions. Such measures have regularly been challenged in practice, mainly on the grounds of the tax avoidance doctrine. However, the Swiss Federal Supreme Court has not previously addressed the issue.

Therefore, the significance of the decision lies less in its outcome, which aligns with existing practice, than in its reasoning. The Federal Supreme Court denied deductibility on the basis of the lack of commercially justified expenses under the Federal Direct Tax Act (FDTA), without relying on the traditional tax avoidance doctrine.

1. Context

In a recent decision of the French data protection authority ("CNIL"), an Irish company belonging to the Shein group was imposed an administrative fine of EUR 150 million for breaching the rules applicable to cookies (link). The decision was subject to appeal and may therefore not yet be final. Beyond its exceptional amount, this sanction sends a clear message: cookie management is no longer a matter of mere formal compliance but a significant legal, financial and reputational risk mitigation exercise.  

While this decision is rooted in EU law (namely the GDPR and the ePrivacy Directive), it also raises important questions for Swiss companies, including:

• What rules apply to cookies under Swiss law?
• What are the specific risks in the event of non-compliance?
• Are Swiss companies also exposed to EU rules and sanctions as a result of cookie practices?

2. Cookies under Swiss law: key rules

2.1. Swiss legislation

Unlike the European Union, Switzerland does not have a standalone and detailed legal regime specifically dedicated to cookies. Their use is nevertheless regulated by:

• the Federal Act on Data Protection ("FADP");
• the Ordinance on Data Protection ("DPO");
• the Telecommunications Act ("TCA");

as well as the practice of the Swiss Federal Data Protection and Information Commissioner ("FDPIC").

The starting point is clear: where cookies enable the collection or processing of personal data, the FADP applies. This is in particular the case for tracking, analytics, behavioural advertising or profiling cookies.

2.2. Consent: when is it required?

Under Swiss law, the use of cookies is not systematically subject to prior consent. The assessment depends on: (i) the type of cookie (essential vs. non-essential), (ii) the purpose pursued, and (iii) the intensity of the interference with the data subject's personality rights.

• Essential cookies: cookies that are strictly necessary for the technical operation of a website (e.g. shopping cart functionality, authentication and security) are in principle permissible without consent, based on a prevailing private or public interest.
• Non-essential cookies: by contrast, cookies used for marketing purposes, targeted advertising, behavioural tracking or profiling do impact personality rights. Under Swiss law, such interference may, for example, be justified either by a prevailing private or public interest (following a balancing of interests) or by the valid consent of the data subject.

Where non-essential cookies only marginally impact personality rights and do not entail high-risk profiling, the processing may, depending on the circumstances, be justified on the basis of a prevailing interest. In such cases, users must at least be granted a clear, effective and easily exercisable right to object (opt-out).

However, where the use of non-essential cookies entails extensive tracking, cross-referencing of data, or profiling presenting an increased risk for the data subject, the balancing of interests will generally not suffice. In such cases, the valid consent of the user is required. According to the FDPIC, such consent must be: (i) freely given, (ii) specific, (iii) informed and (iv) expressed through a clear affirmative act (opt-in).

Purely passive or ambiguous mechanisms (such as continued browsing or pre-ticked boxes) may be problematic, in particular where the processing involves in-depth online behavioural tracking.

2.3. Information and transparency obligations

Irrespective of the issue of consent, the FADP imposes enhanced transparency and information obligations.

In particular, users must be informed of:

• the identity and contact details of the data controller;
• the specific purposes of the cookies;
• the categories of personal data collected;
• the recipients or categories of recipients (including third parties) and, if abroad, the jurisdiction(s) of their domicile; and
• the safeguards relied upon for transfers of personal data abroad, as applicable.

In practice, this requires providing clear and easily accessible information on the use of cookies, typically through a specific section in the privacy policy or a separate cookie policy, and ensuring that users are able to understand the processing and exercise their rights.

​​​​​​​​​​​​​​2.4. Consequences of non-compliance

The revised FADP has significantly strengthened the sanctions regime in Switzerland. In the event of an intentional breach of certain obligations (in particular failures to comply with information duties, data security requirements or restrictions on cross-border data transfers), criminal fines of up to CHF 250,000.- may be imposed.

A specific feature of the Swiss system should be emphasised: sanctions are, in principle, imposed on the responsible individuals (such as executives or decision-makers), rather than on the company as such.

Beyond criminal sanctions, non-compliance may also give rise to: (i) enforcement actions by the FDPIC, (ii) reputational damage, (iii) civil litigation and (iv) a loss of users' trust.

Practical takeaways:

• Precisely map the cookies and similar technologies used on the website(s) (purposes, retention periods, third parties involved).
• Assess whether certain cookies go beyond what is strictly necessary and therefore require a justification based on a balancing of interests or explicit consent.
• Determine the appropriate legal mechanism for non-essential cookies:
  • rely on an opt-out (right to object) for non-essential cookies with only limited impact on personality rights, where a balancing of interests may be justified; and
  • implement an opt-in (express consent) for cookies involving extensive tracking or higher-risk profiling.
• Ensure that the choice mechanisms offered to users are effective and understandable.