The revised circular takes into account, in particular, the Swiss Federal Supreme Court ruling 9C_135/2023 of 6 June 2024 and replaces the previous circular dated 4 May 2018. It applies from the date of publication.

The changes are particularly relevant for companies operating employee share ownership schemes, intragroup equity incentive plans and share-based compensation arrangements.

What Changes Regarding Treasury Shares?

A significant change concerns the corporate income tax treatment of treasury shares acquired by a company and subsequently transferred to employees.

Under the previous SFTA practice, differences between acquisition costs and fair market value upon transfer could generally be taken into account for tax purposes.

Under the revised practice:

• The repurchase of treasury shares is treated as a tax-neutral capital reduction for corporate income tax purposes.
• Their subsequent reissuance is treated as a tax-exempt capital contribution.
• The difference between acquisition costs and fair market value upon transfer to employees is disregarded for tax purposes.
• The difference between fair market value and the lower price paid by employees qualifies as a commercially justified personnel expense, provided it has actually been recorded in the accounts.

The SFTA therefore explicitly distinguishes between tax-neutral equity transactions and tax-deductible personnel expenses.

Example: Transfer of Treasury Shares to Employees

A company acquires treasury shares for CHF 1’300.00. At the time of transfer to employees, their fair market value amounts to CHF 1’000.00. The employees pay CHF 200.00.

The revised practice results in the following tax treatment:

• Acquisition costs of the shares: CHF 1’300.00
• Fair market value upon transfer: CHF 1’000.00
• Price paid by employees: CHF 200.00
• Tax-irrelevant value difference: CHF 300.00
• Commercially justified personnel expense: CHF 800.00, provided it has actually been recorded in the accounts

The value difference of CHF 300.00 is therefore no longer deductible for corporate income tax purposes.

What Are the Implications for Group Structures?

The revised treatment of treasury shares also applies to employee share plans under which one group company acquires shares and transfers them to employees of another group company.

In particular:

• The acquisition and reissuance of treasury shares by the group company are treated as equity transactions for corporate income tax purposes.
• Gains or losses arising from the reissuance of treasury shares are disregarded for tax purposes.
• Intragroup charges for providing the equity instruments must comply with the arm’s length principle.
• At employer level, the commercially justified expense is generally determined by the difference between the agreed intragroup price and the amount paid by employees.

Any difference between fair market value at the time of transfer and the agreed intragroup price does not, in itself, give rise to an additional deductible expense or taxable income at employer level.

What Applies When Employees Return Shares?

The revised circular also clarifies the treatment of shares that employees are required to return under contractual or plan provisions.

Where treasury shares are returned directly to the company whose equity instruments are concerned, the transaction is generally treated as a tax-neutral capital reduction for corporate income tax purposes.

However, where shares in a group company are returned to the legal employer, tax-relevant value differences may arise.

The tax consequences therefore depend on the companies involved, the contractual obligations and the specific structure of the share plan.

What Is the Significance for Accounting and Financial Statements?

The revised circular confirms the principle that the statutory financial statements form the basis for tax assessment under Article 58 paragraph 1 letter a of the Swiss Federal Direct Tax Act (DBG).

Expenses that have not been recorded in the statutory accounts generally cannot subsequently be claimed solely for tax purposes.

For share-based compensation arrangements, particular attention must therefore be paid to the recognition of personnel expenses, the accounting treatment of treasury shares and intragroup recharges.

For entitlements to employee shares and compensation arrangements involving vesting periods, the corresponding provisions and their appropriate allocation to accounting periods must also be considered.

Recommended Actions

Companies operating existing employee share plans should review the tax treatment of their transactions in light of the revised circular.

Particular attention should be paid to:

• The tax-neutral treatment of treasury share acquisitions and reissuances.
• The distinction between personnel expenses and equity transactions.
• The correct accounting treatment of share-based compensation.
• The arm’s length nature of intragroup charges.
• The implications for current corporate tax returns and reconciliation between statutory and tax accounts.

For complex group structures or material equity incentive arrangements, obtaining a prior tax assessment or advance tax ruling may be advisable.

The official communications and statutory provisions issued by the Swiss federal authorities shall prevail.

Sources:

https://www.estv.admin.ch/de/newnsb/T3giBDbkkVF6

https://www.estv.admin.ch/dam/de/sd-web/YX7SYdIDkqPJ/1-037A-D-2026-de.pdf

https://www.estv.admin.ch/de/kreisschreiben-direkten-bundessteuer