Resale of Own Shares to Employees: No Taxable Profit (Federal Court Ruling)

In a decision published on 6 June 2024, the Swiss Federal Supreme Court confirmed that, in the context of an employee share ownership plan, the capital gain realised on the resale of the company's own shares has no impact on income tax. In this case, in the event of resale at a higher market value than the acquisition value, the difference is treated as a tax-exempt capital contribution in accordance with Article 60(a) LIFD.

The tax treatment of a company's purchase of its own shares has given rise to much debate and has been the subject of a number of practical developments. This long-awaited decision clarifies the alignment between the new accounting law, in force since 2013, and tax law. The Federal Court has rejected the position of the SFTA, which argued that the old practice could still be applied by invoking the corrective rule of Article 58 para. 1 let. c LIFD.

However, it is important to stress that the repurchase of own shares by a company raises other complex issues not addressed in this judgement, such as that of direct partial liquidation.

It remains to be seen whether this ruling will also influence the tax treatment of stamp duty (trading and issue stamp duty) and capital contribution reserves (CCR) under Article 5(1bis) of the Withholding Tax Act.

Our experts will be happy to answer any questions you may have about transactions involving treasury shares.