1 The Tax Consultancy of employee shareholdings is based on circular no. 37 of the Swiss Federal Tax Administration dated July 22, 2013, which is based on the federal law on the taxation of employee shareholdings of December 17, 2010 (AS 2011 3259).
2 The requirements of the ordinance of June 27, 2012, on the certification requirements for employee participation (Employee Participation Ordinance, MBV; SR 642.115.325.1) apply to the certification of employee participation.
3 The taxation of exported employee shareholdings is based on the information sheet from the cantonal tax office on withholding tax on non-cash benefits from exported employee shareholdings by § 100a StG (ZStB No. 29/510).
B. Taxation of Employee Stock
I. Income Tax
- General
1 Employee shares within the meaning of this information sheet are shares in the employer company or a group company (hereinafter referred to as “employer”) that transfers these to an employee based on his or her employment relationship. Other share certificates that allow the employee to participate in the company capital are to be treated analogously.
2 If employee shares are transferred on preferential terms, the corresponding pecuniary benefit represents income from gainful employment (Art. 17 Para. 1 StG and Art. 17 Para. 1 DBG).
3 Instruments with which the employer undertakes to grant an employee shares at a later point in time – usually if certain subjective or objective conditions are met – represent mere entitlements to the acquisition of employee shares, because the employee has until these conditions are met or until the shares are transferred via no irrevocably acquired asset (e.g. restricted stock units).
4 The granting of entitlements to the purchase of employee shares, regardless of any conditions, does not trigger any income taxes. Only the legal acquisition of the employee share is decisive.
- Types of Employee Shares
1 Free employee shares are employee shares that an employee can dispose of without restrictions.
2 Blocked employee shares are employee shares that are encumbered with contractual clauses that are based on the employment relationship and reduce their value. The main use cases are employee shares, which are usually subject to a restricted disposal period (blocking period) or a limited or unlimited obligation to return them.
- Time of taxation and determination of taxable income
1 Free employee shares are taxed upon surrender, ie at the time the rights are acquired. The difference between the market value or the formula value of the employee shares and the lower sales price represents taxable income.
2 Blocked employee shares are also taxed upon the issue, ie at the time the rights are acquired. The reduction in value for the blocking period is taken into account with a premium of 6 percent per blocking year on the market value or the formula value. The difference between the discounted value according to the discounting table (B. III.) and the lower sale price represents taxable income. In the case of an unlimited obligation to return the employee shares, they are treated for tax purposes as if they had been subject to a ten-year blocking period when they were sold.
3 In the case of listed employee shares, the market value is generally the closing price on the day the rights are acquired. If the offer and acceptance differ in time and the participation plan provides for subscription periods accordingly, the following applies:
- With a subscription period of up to 60 calendar days, the closing price on the first day of the subscription period is considered to be the relevant market value for tax purposes. In justified cases and consultation with the responsible tax authority, this market value calculation can be deviated from.
- If the subscription period is longer than 60 calendar days, the closing price on the day the offer is accepted is considered to be the relevant market value for tax purposes.
5 In the case of unlisted employee shares, there is usually no market value that could serve as market value. For this reason, the tax-relevant value must be calculated using a method that is suitable and recognized for the respective employer (formula value). If in exceptional cases, a real-time market value is available, this value is generally used as the relevant market value. In individual cases, a formula value can be used at the request of the employer, despite the availability of a market value. However, this exception presupposes that the employer has an unrestricted purchase right to buy back the employee shares at the identically calculated formula value.
- Premature termination of the blocking period
1 If the blocking period expires prematurely, the employee realizes a pecuniary advantage based on the employment relationship at this point, ie income from gainful employment. The reason for the premature end of the blocking period is just as irrelevant as the possible fact that the employee share was purchased at a price that was higher than the tax-discounted market value or formula value.
2 The unblocking of employee shares with an unlimited return obligation is treated in the same way for tax purposes as if it were employee shares with a blocking period of 10 years, i.e. after a holding period of more than 10 years, there is no taxation as the blocking period no longer applies.
3 The taxable earned income corresponds to the difference between the undiscounted market or formula value of the share at the time the blocking period ends and the discounted value corresponding to the remaining blocking period. Blocking years that have started are to be taken into account pro rata temporis.
- Sale of employee shares held as private assets
1 The sale of employee shares held as private assets generally results in a tax-free private capital gain (§ 16 Para. 3 StG and Art. 16 Para. 3 DBG) or a capital loss that is irrelevant for tax purposes.
2 The scope of the tax-free capital gain corresponds to the difference between the market value at the time of sale and the market value at the time of sale or the difference between the formula value at the time of sale and the formula value determined using the same valuation method at the time of sale. Any excess profit, which is due in particular to a change in the valuation method or a change from the formula to the market value principle, is taxed as additional earned income at the time of the sale.
3 If the event triggering the change from the formula to the market value principle occurs after the employee shares have been held for five years, any excess profit is not additionally taxed.
- Return of Employee Stock
1 If an employee has to return employee shares to his employer due to a regulatory or contractual obligation already entered into upon acquisition, this can result either in a loss of assets due to the employment relationship or in taxable income.
2 The employee realizes taxable income from the positive difference between the return price and the market or formula value (discounted according to the remaining blocking period).
3 If the employee shares have to be returned to the employer free of charge or at a price below the current market or formula value (possibly discounted according to the remaining lock-up period), the employee can claim a deduction of acquisition costs in the tax period of the return. The extent of the deduction of acquisition costs corresponds to the negative difference between the return price and the market or formula value (if applicable discounted according to the remaining blocking period).
- Import of employee shares in international relation
7.1 Employee Shares
1 Imported employee shares are those that an employee has acquired in another country and brings with him when moving to Switzerland.
2 If the employee shares are to be taxed upon acquisition by this leaflet, their import into Switzerland (subject to the tax consequences under) does not trigger any income taxes.
7.2 Employee stock purchase entitlements
Imported entitlements to the acquisition of employee shares are instruments that an employee received in another country, then brings to Switzerland and realizes here for tax purposes by acquiring employee shares.
If employee shares are acquired in Switzerland based on imported entitlements, the monetary benefit is generally taxed in Switzerland.
If the imported entitlements are subject to subjective conditions, according to which the employee must first earn or earn the entitlement, only that portion of the monetary benefit achieved – subject to progression – is taxed as earned income which can be traced back to work in Switzerland or was earned. The income from work that is taxable in Switzerland is calculated as follows: