question: ‘How is a shareholding classified for tax purposes? tag: ‘taxes’
updatedAt: ‘2024-02-05’
Which share price is relevant for tax purposes is defined by the competent tax authority of the issuer. Depending on the jurisdiction, there are different valuation approaches.
In Switzerland, for example, a distinction is made between issuers where share transfers occur more frequently and those where they occur less frequently. For companies with frequent trading, e.g. with a stock exchange listing, this is the closing price at the end of the year. In the case of private companies, a finer distinction is made, in particular as to whether a company founder, employee or investor is involved.
If the procedure is followed in accordance with Circular 28, the following classifications generally result:
Founder shares that are NOT covered by a tax “ruling”?
- the tax price is the formula-based tax price (substance method), the lower limit is the nominal price
Founder shares that are covered by a tax ruling? 2. the tax price is the tax price stated in the tax ruling, e.g. substance method, the lower limit is the nominal price
Employee participation NOT covered by a tax ruling? 3. the tax price can be the investor price
Employee participation covered by a tax ruling? 4. the tax price is the tax price stated in the tax ruling, e.g. substance method, the lower limit is the nominal price
Shareholding of the investor? 5. the tax price is the subscription (capital increase) or transfer price. However, the tax authorities may also classify the investors in accordance with Circular 28. This can then be inferred from the tax authority’s confirmation of the definitive tax price
Finally, the calculation of the provisional tax price by a qualified party, such as a trustee, is highly recommended.