All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Switzerland: Beware of equity incentive reporting obligations in Switzerland

intl-updates-small.jpg

Employers in Switzerland are required to provide details on employee equity incentive holdings in a statement included with the annual Swiss salary certificate.

These statements are known as 'equity annexes', and all companies awarding equity incentives to Swiss-based (resident or non-resident) employees must comply with this requirement. Equity annexes are not new, but the cantonal tax authorities throughout the country are becoming stricter when ensuring that equity incentive reporting is accurate. Failure to comply can be costly for employers, both from a reputational and a financial perspective.

Employee equity incentive reporting for internationally mobile employees can be challenging even for the best run payroll departments. Employers should be aware of the following.

Misreporting

Common equity incentive reporting mistakes include:

  • Failure to prepare annexes when no transaction has taken place;

  • Failure to include all required information in the reporting document; and

  • Reporting only the Swiss taxable portion of income in the salary certificate (the authorities require full reporting).

These mistakes can have an impact on the calculation of an employee's income tax liability.

Consequences of failure to comply

The requirement to prepare equity annexes has been in existence for five years as of January 2018. Certain tax authorities previously tolerated non-filers as long as equity income was reported in the salary certificate; however, this practice has shifted over the years and employers that fail to file correct annexes now face stiff penalties.

When inaccurate annexes are discovered for the tax period in progress, the Swiss tax authorities often also will audit prior years' reporting to check for similar mistakes. Switzerland's 10-year statute of limitations can make this exercise challenging for plan administrators and payroll departments.

Other business benefits

Aside from the compliance requirements, proper reporting of employee equity incentives has business benefits, such as:

  • It is an easy way to verify total equity income, which is helpful in cases of multiple exercises and vestings;

  • It clearly shows the allocation of foreign and Swiss-sourced equity income for purposes of reporting income in the salary certificate;

  • It provides a helpful overview for employees by showing the different sources of employment income for the relevant year, the income they can expect to realise in the following years and the vesting dates of the shares in their employee portfolio;

  • It enables employees to accurately report their equity income on the tax return; and

  • It provides useful information for human resources and global mobility teams with Swiss-based employees.

Comments

Employers should invest time in reviewing the requirements for employee equity incentive reporting. Once the obligations are well-understood, the process can be automated and administered by payroll generalists.

van-den-eeckhaut.jpg
schneider.jpg

Renaat

van den Eeckhaut

Anna

Schneider

Renaat van den Eeckhaut (rhvandeneeckhaut@deloitte.ch) and Anna Schneider (annasschneider@deloitte.ch)

Deloitte

Tel: +41 58 279 6986 and +41 58 279 6112

Website: www.deloitte.ch

more across site & bottom lb ros

More from across our site

Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
ITR is delighted to reveal all the shortlisted firms, teams, and practitioners for the 2022 Americas Tax Awards – winners to be announced on September 22
‘Care’ is the operative word as HMRC seeks to clamp down on transfer pricing breaches next year.
Tax directors tell ITR that the CRA’s clampdown on unpaid taxes on insurance premiums is causing uncertainty for businesses as they try to stay compliant.
HMRC has informed tax directors that it will impose automated assessments on online sellers with inaccurate VAT returns, in a bid to fight fraud.
UK businesses need to reset after the Upper Tribunal ruled against BlackRock over interest deductions it claimed on $4 billion in inter-company loans, say sources.
Hong Kong SAR’s incoming regime for foreign income exemptions could remove it from an EU tax watchlist but hand Singapore top spot in APAC.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree