The Art of Valuation: Non-Publicly Traded Corporations and LLCs in Switzerland

In Switzerland, the valuation of stock corporations (AGs) and limited liability companies (GmbHs) that are not listed on the stock exchange is an important issue. This article sheds light on the current methods and regulatory conditions relevant in 2023.

Valuation Framework

According to Circular 28, the conditions for the valuation of unlisted securities for wealth tax purposes in Switzerland are defined. The fair market value, which is decisive for tax purposes, is determined according to the guidelines for the valuation of securities without market value.

The valuation methods vary depending on the business activities of the company. Holding, asset management, and financing companies are valued based on asset value, while trading, industrial, and service companies determine the enterprise value from a combination of earnings and asset value.

Asset Value

The asset value of a company generally corresponds to the taxable equity plus hidden reserves on various assets such as securities and properties, minus latent taxes.

Earnings Value

The calculation of the earnings value is based on the net profit according to the annual financial statement, which is adjusted by specific corrections. The corrected net profit thus obtained is then either simply weighted over three years or the last business year is weighted double.

Example of a Valuation

Consider a non-listed trading company in Switzerland. The taxable equity amounts to CHF 2 million, and there are hidden reserves of CHF 500,000 on properties and securities, minus latent taxes of CHF 100,000. The net profit for the last three years is CHF 300,000, CHF 350,000, and CHF 400,000.

Asset Value Calculation

Asset Value = Taxable Equity + Hidden Reserves - Latent Taxes

= CHF 2,000,000 + CHF 500,000 – CHF 100,000 = CHF 2,400,000

Earnings Value Calculation

Corrected Net Profit:

= (CHF 400,000 x 2 + CHF 350,000) / 3

= CHF 383,333

Earnings Value = Corrected Net Profit / Capitalization Rate (assumed 9.5%)

= CHF 383,333 / 0.095

= CHF 4,035,084

Enterprise Value

Enterprise Value = (2 x Earnings Value + Asset Value) / 3

= (2 x CHF 4,035,084 + CHF 2,400,000) / 3

= CHF 3,490,056