Transposition of shareholdings in Swiss tax law

Summary of the article

Profits from the sale of investments from private assets are generally tax-exempt. However, this principle does not apply without restriction: in the event of a transposition, a supposedly tax-exempt capital gain is recognized in whole or in part as taxable income. A transfer occurs when holdings from private assets are transferred to a company in which the selling person holds at least 50% of the capital after the transaction. In addition, the proceeds must exceed the nominal value of the transferred holding, including any reserves from capital contributions (KER).

Initial situation and systematic background

In a transposition, ownership rights are transferred from the seller's private assets to the business assets of the purchasing company, which in turn is wholly or partly owned by the seller of the ownership rights. In practice, this is often referred to as a "sale to oneself."

If a natural person holds a stake in a corporation as part of their private assets, retained earnings can generally only be transferred to private assets via a taxable profit distribution, usually in the form of a dividend. However, if the stake is sold to a company controlled by the shareholder, this leads to a change in the system. In the case of the acquiring corporation, distributions from existing assets are generally tax-free. This allows deferred income tax liabilities to be eliminated in a targeted manner through a transaction controlled by the previous shareholder. For a long time, this arrangement was viewed critically in practice as tax avoidance and was finally enshrined in law in 2007 as an objective form of tax avoidance.

Legal basis for transposition

The transposition is based on Art. 20a para. 1 lit. b) DBG and Art. 7a para. 1 lit. b) StHG. Transposition occurs when a natural person transfers participation rights from their private assets to a corporation in which they hold at least 50% of the capital after the transaction, and the transfer value exceeds the nominal value of the participation.

If all requirements are met, the difference between the sale or transfer value and the nominal value of the transferred shareholding is considered investment income and is subject to income tax. Unlike indirect partial liquidation, transposition does not require any subjective element. An intention to evade tax is therefore not necessary.

Case study: Federal Supreme Court ruling of October 1, 2025 (9C_233/2025)

A recent Federal Supreme Court ruling from the canton of Geneva (9C_233/2015 of October 1, 2025) illustrates the scope of the transposition offense. In the underlying case, taxpayer B.A. acquired all shares in C. SA from D. in 2017 for a total purchase price of CHF 2.6 million. The parties agreed on a staggered transfer: 30% of the shares were to be transferred with economic effect as of January 1, 2017, and the remaining 70% as of January 1, 2021. Until it was later transferred to a corporation owned by B.A., the shareholding was undisputedly part of B.A.'s private assets.

In 2020, the parties decided to adjust the original shareholding structure and introduce a holding structure instead of direct shareholding. To this end, B.A. founded E. GmbH on October 14, 2020, in which he was the sole shareholder and managing director with sole signing authority. The plan was to transfer both the 30% of C. SA shares already held economically and the 70% to be transferred later to this holding company.

In the 2020 tax year, however, only the 30% stake already held was initially transferred to the holding company. In his 2020 tax return, B.A. declared the transfer of this 30% stake in C. SA to E. GmbH. He subsequently held 200 ordinary shares in the holding company, which corresponded to a 100% stake in the share capital.

The tax administration of the Canton of Geneva classified this transaction as a transposition within the meaning of Art. 20a para. 1 lit. b) DBG. It initially set a taxable income of around CHF 2.5 million, i.e. the Geneva tax authorities wanted to tax the entire value of the shareholding and not just the portion that was actually transferred. In the appeal proceedings, it reduced this amount to CHF 750,000, corresponding to the difference between the market value of the 30% shareholding contributed (CHF 780,000) and its nominal value (CHF 30,000). This amount was added to B.A.'s income from movable assets for the 2020 tax year.

Both the cantonal authorities and the Federal Supreme Court confirmed that the transfer of the 30% stake in C. SA to the newly founded E. GmbH qualifies as a transposition under Art. 20a para. 1 lit. b) DBG. The decisive factors were the objective criteria: the shares came from the taxpayer's private assets, the acquiring company was wholly controlled by him, and the economic value of the contribution significantly exceeded the nominal value of the transferred shareholding. Neither economic nor organizational motives influence the tax classification. The purchase price paid or agreed by B.A. to D. in 2017 is also irrelevant for the assessment of this transfer. The absence of any intention to circumvent the law is therefore also irrelevant. The Federal Supreme Court therefore confirms that the difference between the economic value of the contribution and the nominal value of the transferred shareholding is to be recognized as taxable income from movable assets.

Conclusion and practical significance

The Federal Supreme Court ruling shows the significant tax consequences that can result from affirming the transposition of facts. Only the objective facts of the case are decisive in this regard. Subjective elements are not taken into account. In the present case, B.A. could have achieved the desired result without income tax consequences if he had structured the acquisition from the outset via E. GmbH as the acquiring company. In this respect, the facts of the case are not based on an intention to evade tax from the outset. In practice, this means that restructuring involving the transfer of shareholdings from private to business assets must be carefully examined in advance. The structure of the consideration and the composition of the proceeds are particularly relevant.

If, for economic or organizational reasons, a shareholding is nevertheless subsequently transferred to a corporation owned by the owner, other tax-neutral structuring options are available. For example, the shareholding can be contributed or sold at its nominal value plus any capital contribution reserves (KER) in a tax-neutral manner. However, it should be noted that a transfer below market value is generally classified as a hidden capital contribution and is therefore subject to stamp duty, unless the contribution is structured as a quasi-merger in the context of a capital increase through the issue of new shares.

If the transfer is made at a value higher than the nominal value, the difference can still be credited to the reserves of the purchasing company in a tax-neutral manner under the so-called agio solution. However, the resulting reserve is considered a free reserve for tax purposes and not a capital contribution reserve (KER), and is therefore generally subject to Individual Income Tax for the shareholder.