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Wealth tax

Reduction of wealth tax values of securities without market value through adjusted valuation procedure

 

For the calculation of wealth tax values for securities without market value (= unlisted participations), a new calculation method of the capitalization rate will be applied as of the tax year 2021. The capitalization rate is a decisive parameter for the valuation of securities without market value and will be increased with the new determination method and should reduce the wealth tax values of such shareholders accordingly.

 

Like other assets, securities without market value are generally valued at fair value as of the reporting date of December 31 of each year, whereby the market value is deemed to be the fair value. In the absence of a market value, reference is made to circular 28 of the Swiss Tax Conference on valuation and the practitioner’s method is often applied, taking into account the earning value and net asset value. In this method, the average net profit of the last two or three years is capitalized with the capitalization rate to determine the earning value. The capitalization rate amounts to 9.5% for the tax year 2021 using the new calculation method and is thus higher than the one for 2020 of 7% determined using the old method.

 

The new, higher capitalization rate thus reduces the earning value and, accordingly, the wealth tax value of your securities without market value or shares in unlisted participation, respectively. We would be happy to show you the impact on your wealth tax burden in 2021. Please also note that due to the broad application of the fair market value calculation according to circular 28 of the Swiss Tax Conference, there may be implications for advanced tax rulings, e.g., employee participation plans, etc.

 

For any further questions or advice, please contact Remo Merz, Swiss certified tax expert, merz@fineac.ch or Cornelia Hager, Head individual taxation, hager@fineac.ch.

 

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Remo Merz, 28 January 2022

 

Keywords: tax, tax return, wealth tax