Wealth tax and the valuation of unlisted shareholdings in Switzerland

Short answer

Switzerland levies a wealth tax – but only at cantonal and municipal level, not federally. Unlisted shareholdings are valued under Circular No. 28 of the Swiss Tax Conference, trading companies usually with the practitioner method combining double-weighted earnings value and net asset value. Minority shareholders can claim a flat 30 percent discount under certain conditions. For business families, the tax value of their holdings is therefore a key factor.

Wealth tax basics

The tax applies to the worldwide net assets of individuals resident in Switzerland, except real estate and permanent establishments abroad; these are only taken into account to determine the tax rate. Debts are deductible. Rates vary by canton and are progressive, and municipal taxes are added. The relevant date is the end of the tax period.

Listed securities are recorded at the price on the reference date; the Federal Tax Administration publishes an annual price list for this purpose. Real estate is recorded at the cantonal tax value, which is usually below market value.

Valuing unlisted shares

Shares without a market price are governed by Circular No. 28 of the Swiss Tax Conference of 28 August 2008, the guidelines on valuing securities without a market price for wealth tax. Trading companies are usually valued using the practitioner method: the company value is the average of the net asset value and the double-weighted earnings value. The earnings value is based on the results of the last financial years and a capitalisation rate set every year.

Pure holding and asset management companies are valued at net asset value. The tax administration of the canton where the company has its seat is responsible; the other cantons usually adopt its valuation. Some cantons deviate in details, for example in the weighting or the capitalisation rate.

Flat discount and special cases

• Minority shareholders can, under certain conditions, claim a flat discount of 30 percent for restrictions on their property rights; some cantons grant it as a rule for holdings of up to 50 percent.
• Newly founded companies and start-ups are valued at net asset value during the start-up phase until representative results are available; the practitioner method applies thereafter.
• Companies in liquidation are valued at the expected liquidation proceeds.
• Prices from transactions between independent third parties can be used to determine market value.

What the family should keep in mind

• The tax value can differ significantly from market value – upwards as well as downwards.
• Wealth tax can create a liquidity burden without distributions; dividend policy and liquidity planning go together.
• Gifts and divisions of an estate often require a market value that differs from the tax value.
• Submit annual financial statements on time so that tax values are available for the tax return.

In practice: keep tax value and market value separate

Family wealth should be tracked at economic value, the tax return at tax value. FLIORE stores valuations with method and source; tax values can be recorded as a separate valuation so that both views remain traceable.

At a glance

Frequently asked questions

Sources

• Swiss Tax Conference – Circular No. 28
• Swiss Federal Tax Administration (ESTV) – wealth tax
• ESTV – price list (ICTax)

This page provides orientation and does not replace legal or tax advice. The cited legal sources in their applicable version are authoritative.

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