Taxation of employee participation - Part 2: Timing and assessment of the tax valuation of employee shares

Employee participations can make up an attractive part of salary. In addition to regular salary payments, employees receive participation rights in the company. However, the taxable value of such employee participations, and the timing at which they are taxed, is regularly not self-explanatory. Therefore, Findea summarizes everything you need to know about employee participations in a series of articles. This second article addresses the timing and assessment of the tax valuation of employee shares.

Listed Employee Shares

‍Employee shares are taxed at the time of acquisition of the rights. The tax assessment is based on the difference between the market value and the price that employees must pay (if applicable). For example, if the market value is 100 Swiss Francs, but employees only need to pay 80 Swiss Francs, the difference of 20 Swiss Francs represents taxable income.

The moment of acquisition of rights occurs when the employee accepts the offer for employee shares. Especially in large companies, there are often subscription periods within which the employee must either accept or reject the offer. If such subscription periods exist, they are divided into two categories:

• If the subscription period lasts longer than 60 days, the closing price on the day the offer is accepted is considered the relevant market value for tax purposes.
• If the subscription period lasts less than 60 days, the market value at the close of trading on the first day of the subscription period is relevant for tax purposes. In justified cases, this can be deviated from in consultation with the responsible tax authority.

If there is no subscription period, then likewise the market value at the close of trading on the day the offer is accepted is the one relevant for tax purposes.  

Non-listed Employee Shares

‍Sometimes, even for non-listed employee shares, a market value can be determined. If this is possible, it is basically relevant for taxation. However, in justified cases, one can deviate from this in consultation with the responsible tax authority.

If no market value can be established, or it is intended to deviate from it, the value will be calculated using a method recognized for the specific employer and represents a formula value. Once a calculation method is chosen, it must be consistently applied for the specific participation plan.

This formula value is valid if it has not been calculated more than six months before. If the formula value is older, the formula value of the coming year (valuation date) must also be considered.

Detailed information can be found in the Circular 37 of the Federal Tax Administration.

Findea helps you to keep your taxes simple and straightforward.

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