• Rinaldo Neff, Director |
  • Sandra Bütler, Expert |


Most Swiss companies prepare – at least as a basis for the tax return – annual financial statements in accordance with the principles of the Swiss Code of Obligations (CO). In the meantime, however, the CO also allows for the use of "recognized accounting standards". Groups of companies above a certain size are further required to prepare consolidated financial statements. If the financial statements are prepared in accordance with one of the recognized standards such as Swiss GAAP FER or IFRS, they fulfill the principle of "true & fair view" and enable a reliable assessment of the economic situation. Interesting questions arise with regard to the tax valuation of shares in such companies. The determination of the applicable capitalization rate as well as the cantonal differences in the handling of the lump-sum deduction for minority interests can considerably influence the tax valuation of companies and the wealth tax value for shareholders.

Basis for the valuation according to KS 28

In the guidelines for the valuation of securities without market value for wealth tax (hereinafter "KS 28"), the term "annual financial statement" is used for the figures on which the valuation is based. There is no indication of the principles according to which the annual financial statement must be prepared. This is probably due to the fact that KS 28 dates from 2008, and thus from the time before  the new accounting law was introduced. At that time, companies had to prepare their financial statements in accordance with the provisions of the CO, which meant that the term "annual financial statements" referred to the financial statements prepared in accordance with the CO. The new accounting law offers companies the option of applying recognized accounting standards such as Swiss GAAP FER or IFRS. 

The statements in KS 28 on the application of the consolidated financial statements as a basis for the company’s valuation leave considerable room for interpretation. Consequently, it is advisable to examine whether the individual valuation of group companies (incl. offsetting of hidden reserves on participations) or the valuation based on consolidated financials is more beneficial for tax purposes. In certain constellations, it may be worthwhile to prepare (consolidated) annual financial statements in accordance with the Swiss Code of Obligations in addition to the consolidated financial statements in accordance with a recognized accounting standard for tax valuation purposes. 

Experience shows that tax authorities are collaborative in the application of different valuation approaches, whereby their top priority is consistency! Thus, once a valuation basis has been selected, it must be applied for a certain period of time along with the chosen valuation method. 

Capitalization rate

Another decisive factor influencing the market value of securities for wealth tax purposes is the capitalization rate. According to KS 28, the enterprise value is calculated (with some exceptions) by weighting the capitalized earnings value twice and the net asset value once. To determine the capitalized earnings value, the average annual profit (of the last two or three years, depending on the valuation model) is divided by the capitalization rate. 

The capitalization interest rate is composed of the interest rate of a risk-free investment and the risk premium applicable to unlisted companies (incl. surcharge for illiquidity) and is published annually in the price list of the FTA. For the 2021 tax year, it is set at 9.5%. The approach for deriving the capitalization interest rate may lead to an inappropriate result, in particular with regard to the risk premium. This is the case with an above-average entrepreneurial risk due to an individual business model. Some cantons are cooperative in evaluating the appropriate interest rate.

Lump-sum deduction for asset-related restrictions

In order to take into account the limited influence of minority shareholders on a company, the minority shareholder (shareholding up to and incl. 50%) can claim a flat-rate deduction of 30% on the gross tax value of his shares. However, this is generally only granted if the shareholder has not received an appropriate dividend. The dividend for the 2021 financial year is appropriate if it amounts to at least 1.8% in relation to the market value of the share. This is based on the average of the dividends paid in the last two calendar years.

While the Canton of Basel-Landschaft always allows the lump-sum deduction for a yield of less than 3%, the Canton of Aargau grants a general reduction of the gross tax value of 50% (in addition to the ordinary lump-sum deduction for minority shareholdings). The Canton of St. Gallen grants the lump-sum deduction even if the shareholder has received an adequate dividend. 


Although KS 28 describes in detail the framework conditions for the valuation of shares without market value, it contains a certain margin of discretion in some areas. It is worth analyzing this for the individual case at hand, examining different scenarios and finding an appropriate solution in collaboration with the tax authorities.

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