Generally, the wealth tax value of unlisted shares is determined using the valuation formulas of Circular No. 28. If there is a significant change in ownership of these shares, the corresponding pruchase price may result in a fair value that is relevant for wealth tax purposes.
Circular No. 28 (guidelines for the valuation of securities without market value for wealth tax purposes; hereinafter "KS 28") aims at the uniform valuation for Swiss tax purposes of domestic and foreign securities that are not traded on any stock exchange. Often, the formula value according to KS 28 is lower than the company’s effective market value. If significant changes of ownership of these unlisted shares take place among independent third parties, the corresponding sales price is generally considered to be the fair market value until further notice and is therefore also relevant for wealth tax purposes.
Significant change of ownership among independent third parties
The term " significant " is not used uniformly in tax law and has deliberately not been quantified as a percentage in the commentary to KS 28. A change of ownership price is to be taken into account if a justifiable, plausible market value can be derived from it. This means that it must be examined in each case whether a relevant transfer price can be derived from a transaction. As a rule of thumb, however, it can be assumed that a transaction volume of 10% per year can be regarded as significant.
Not every transfer price precedes a formula valuation. If shares are bought and sold by the company itself or among shareholders, the corresponding transactions are generally not considered to have taken place "among independent third parties" and therefore no fair market value arises.
Shareholders’ agreement (“ABV”)
According to KS 28, contracts under private law, such as ABV, which affect the transferability of shares are irrelevant for tax purposes. This has been criticized in practice and can lead to disruptive results if the wealth tax value of a participation is higher than the effective sale price to be achieved or obtained.
Example: The shares of an unlisted company are held 50% each by two private persons. In their ABV it is agreed that the shares have to be sold at the net asset value. The enterprise value of this company amounts to CHF 2 million based on the formula valuation according to KS 28, but the net asset value of this company is only CHF 1 million.
Although according to the ABV the shareholder can achieve maximum sales proceeds of CHF 500,000, he has to declare his shares with a net worth tax value of CHF 1 million in the tax return.
A market value, which is applicable for wealth tax purposes, is also established by prices paid by investors on the occasion of financing rounds or capital increases. During the startup phase of a company, however, these investor prices are not taken into account.
The startup phase is neither precisely defined in KS 28 nor in the commentary thereto. However, as soon as representative business results are available, the company is no longer to be valued at net asset value but at formula value.