Switzerland: Valuation of unlisted shares for wealth tax purposes
Guidelines for valuation for wealth tax purposes of securities that are not traded on any stock exchange
Guidelines for valuation for wealth tax purposes
Circular No. 28 provides guidelines for the valuation for wealth tax purposes of securities that are not traded on any stock exchange. Often, the formula value according to Circular No. 28 is lower than the company’s effective market value. However, 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 and is thus relevant for wealth tax purposes.
Significant change of ownership
The term "significant" is not used uniformly in tax law and has deliberately not been quantified as a percentage in the commentary to Circular No. 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 determined in each case whether a relevant fair market value can be derived from a transaction. As a rule of thumb, it can be assumed that a transaction volume of 10% per year can be regarded as significant.
Shareholders’ agreement (ABV)
According to Circular No. 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.
Financing rounds
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 not precisely defined in Circular No. 28 or in the commentary.
Sales negotiations
Taxpayers who have tried to establish fair market value using concrete purchase offers have had little success in the past. According to a decision of the Tax Court of the Canton of Basel-Landschaft, sales negotiations merely indicate a possible intention to purchase, but do not provide any reliable information from which a market value can be derived.
Read a June 2022 report prepared by the KPMG member firm in Switzerland
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