In a decision published before Christmas (9C_168/2023 and 9C_176/2023, in French), the Federal Supreme Court addressed whether the grant of shares to managers without consideration under a management incentive plan established by a Swiss holding company is subject to Swiss Securities Transfer Duty. The court concluded that, subject to certain conditions, no Securities Transfer Duty is to be levied.

Fact Pattern

A Swiss holding company, registered as a securities dealer for Securities Transfer Duty purposes, granted shares (PSUs and RSUs) to its managers under a management incentive plan, without consideration, subject to a three-year vesting period. The Swiss Federal Tax Administration and, subsequently, the Federal Administrative Court argued that the share grants were made for valuable consideration and were thus subject to Securities Transfer Duty according to art. 13 para. 1 FDSA (German/French), as the grants were closely linked to the work performed by the managers.

Court Decision

The Federal Supreme Court ruled that the shares could not be linked to specific work performance, meaning their delivery did not constitute consideration for Securities Transfer Duty purposes. Consequently, no Securities Transfer Duty was due. Even if the managers' work had been considered as consideration for the shares, a market value would have had to be determined (art. 16 para. 2 FDSA, German/French), which was not possible. Simply using the market value of the shares granted to employees was inappropriate, as the market value of the shares was subject to fluctuations influenced by factors unrelated to the employees’ performance. This is particularly true for shares listed on the stock exchange.

Deloitte’s View

The Swiss Federal Supreme Court's ruling is a welcome clarification, confirming that the grant of shares without consideration under a management incentive plan is not subject to Securities Transfer Duty. However, the Court's decision does not discuss the question of whether the Securities Transfer Duty applies when a manager acquires shares at a price below market value or when paying for shares upon exercising an option. In such cases, where the transaction involves consideration, the levying of Securities Transfer Duty may be applicable, depending on the specific circumstances and the parties involved. In such cases, a case-by-case assessment has to be done. It should also be noted – for the sake of completeness – that any income tax consequences on the level of the respective employee have to be assessed separately.

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