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

Basic principles

For tax purposes in Switzerland, the assets of individuals are to be valued at fair market value. Whereas the fair market value of listed securities corresponds to the stock exchange price, the valuation of unlisted shares is generally carried out in accordance with the guidelines for the valuation of securities without a market value for wealth tax (Circular letter no. 28 - hereinafter "KS 28"). The purpose of the guidelines is to ensure a uniform valuation throughout Switzerland of domestic and foreign securities that are not traded on a stock exchange or are not regularly traded over the counter.

Valuation methods differ depending on the business activity of the company

Pure holding, asset management and financing companies are valued at net asset value. 

In the case of a trading, industrial or service company, the enterprise value is derived from the double weighting of the capitalized earnings value and the single weighting of the net asset value. 

Net asset value

The net asset value of a company corresponds to the taxable equity capital. Subsequently, hidden reserves e.g., on securities, participations, and real estate – after deduction of deferred taxes – are added to the net asset value. Deferred taxes can be considered if the hidden reserves are subject to taxation upon realization (e.g., hidden reserves on real estate). 

Note from practice: The hidden reserves disclosed in accordance with the tax reform, including the self-created added value, are not recognized for the determination of the net asset value. 

Earnings value

The basis for determining the capitalized earnings value is the net profit according to the annual financial statements of the relevant business years. The net profit is increased or decreased by the following corrections provided for in KS 28 (list not exhaustive). To be added to the net profit are, for example:

  • One-off and extraordinary expenses (e.g., extraordinary depreciation for capital losses, creation of provisions for extraordinary risks).

To be deducted from the net profit are e.g.:

  • Non-recurring and extraordinary income (e.g., capital gains, release of reserves as well as release of provisions within the scope of unrecognized expenses previously corrected in the valuation).

The corrected net profit determined in this way is then either simply weighted over three years (model 2) or the net profit of the last financial year is given a double weighting and the net profit of the previous year is given a single weighting (model 1). 

The weighted adjusted net income is then capitalized at 9.5% for financial statements in Swiss francs. The basis for determining the applicable capitalization rates for Swiss francs and foreign currencies has been recently adjusted for valuations from 2021 onwards. 

Note from practice: The company is generally valued by the tax authorities of the canton in which it is domiciled. The cantons each select one of the two valuation models (model 1 vs. model 2) as the standard model. A company is free to deviate from the cantonal standard model if the other model leads to a more sustainable or appropriate result. In principle, the company remains bound to the model once selected for the next five years.

Illustrative example

Consulting AG achieves a profit of CHF 150'000 in the financial year 2021, a profit of CHF 75,000 in the previous year and a profit of CHF 90'000 in 2019. The equity of the company amounts to CHF 400'000. Consulting AG does not hold any investments and does not own any real estate. 

Net asset value: CHF 400'000

Average annual profit: (CHF 150'000 + CHF 75'000 + CHF 90'000) / 3 = CHF 105'000 (model 2)

Earnings value: CHF 105'000 / 9.5% = CHF 1'105'263

Enterprise value: ([CHF 1'105'263 x 2] + CHF 400'000) / 3 = CHF 870'175

The enterprise value of Consulting AG for wealth tax purposes amounts to CHF 870'175.


Depending on the business activity, different valuation methods are applied. In addition, for company valuations in which the capitalized earnings value is taken into account, a choice can generally be made between model 1 and model 2. The wealth tax rate in Switzerland varies between approx. 0.1% and 1%, depending on the canton/municipality of residence of the individual shareholder. Thus, the determined wealth tax value of privately held securities may have a significant influence on the wealth tax and total tax burden of an individual shareholder. 

As part of a blog series on the valuation of unlisted securities, we will discuss possible optimization potential in company valuations as well as the determination of the tax value due to changes in ownership in a second and third part.

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