In Switzerland there is at present no legal basis for the taxation of equity-based securities, i.e. shares issued to employees and employee stock options. The legal ambiguity in the taxation of options has led the Federal Department of Finance to mandate a federal law on the taxation of equity-based participation plans. This legal draft was submitted to parliament for discussion in November 2004.
This draft expects shares issued to employees to be taxed at the time they are acquired. Options are to be taxed at the time of exercise, whereby the taxable benefit is to be reduced by at least 10% for each blocking year, up to a maximum of 50%.
The two parliamentary councils' differing views in regard to shares issued to employees was eventually eliminated but in regard to employee stock option plans, the two bodies still disagree on the amount of the reduction to be applied.
The Council of States retained its opinion during its 2008 summer session. Hence, for priority reasons regarding tax policies, the National Council's Economic and Tax Commission decided to only continue its decision-making process once parliament has adopted a pending family tax reform. For this reason the discussion on the taxation of equity-based participation plans will only be continued in 2010 at the earliest.
Implications
The National Council's Commission decision has put on hold once more the creation of a new law, and therefore legal ambiguity remains. In order to attain legal security, companies still have to negotiate rulings with the tax authorities.
Remo Schmid (remo.schmid@ch.pwc.com) and Ingrid Niederbacher (ingrid.niederbacher@ch.pwc.com)
