Switzerland, the transfer of shares to the manager is not always taxable income (cross-border guide)

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In Switzerland, the free transfer of shares to a manager is not always considered taxable income, if the prevailing cause is the succession to the

Context

In Switzerland, the free transfer of company shares to a manager does not constitute employee income when the main cause of the attribution is the realization of a business succession and not the remuneration of the work activity. In this case, the transfer retains the legacy nature and is excluded from income taxation.

The free transfer of a company's shares to the manager responsible for ensuring their continuity does not automatically have to be subject to income tax. It is necessary to verify what is the prevailing cause of the attribution: if the transfer responds to a business succession project and not to the desire to remunerate the work, it retains a succession nature. This was established by the Swiss Federal Court with judgment 9C_463/2025 of 17 June 2026.

The dispute concerned the manager of a company, active in the company since 1991 and for many years a director and member of the board of directors. The sole owner, without direct descendants and other heirs deemed suitable for management, had concluded with him in 2001 an agreement for the sale of a part of the shares and, at the same time, a succession contract with which he attributed to him, as legatee, all the shares still held at the time of death.

Operational details

When the entrepreneur died in 2016, the manager received 795 registered shares. The tax authorities of the Canton of Aargau classified its value, exceeding eight million francs, as income from employment, arguing that the attribution was linked to the professional position held by the beneficiary. The cantonal judge had instead ruled out taxation, recognizing the prevailing purpose of ensuring the succession to the leadership of the company.

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Key points

The Federal Court upheld this conclusion. The economic connection with the employment relationship, although existing, is not in itself sufficient to transform a legacy into taxable remuneration. Even a donation from the employer or the owner of the company can remain unrelated to remuneration when the remunerative character takes a back seat.

In the concrete case, the absence of suitable heirs to continue the activity, the transfer of the entire company, the long interval of fifteen years between the planning and the death of the settlor and the failure to subordinate the legate to the permanence of the manager in the company were decisive. The attribution was therefore aimed at identifying a suitable successor and preserving business continuity, not rewarding performance or work loyalty. The shares were therefore to be considered subject to a legacy and not taxable income.

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Frequently Asked Questions
When is the transfer of shares to a manager in Switzerland not considered employee income?
The free transfer of company shares to a manager in Switzerland does not constitute employee income when the predominant cause of the attribution is the realization of a business succession, and not the remuneration of the work activity. In this case, the transfer retains the status of 'legatee' and is excluded from income taxation, as determined by the Swiss Federal Court.
Which Swiss judicial body has clarified the taxation of share transfers by business succession?
The Swiss Federal Court, with judgment 9C_463/2025 of 17 June 2026, established the criteria to distinguish between 'tied' and income from employment in the transfer of corporate shareholdings. He confirmed that if the prevailing cause is the business succession, the transfer is not taxable as income from employment, nullifying the cantonal tax claim.
What factors were decisive in considering a share transfer as legacy and non-taxable income?
In the specific case, the decisive factors were the absence of suitable heirs to continue the activity, the transfer of the entire company, the long interval of fifteen years between the planning and the death of the settlor, and the lack of subordination of the legate to the permanence of the manager in the company. These elements have demonstrated a business continuity purpose.
Is the transfer of company shares from an owner to a manager always taxed as income from work?
No, it's not always taxed as earned income. The Federal Court has clarified that the free transfer of shares does not automatically have to be subject to income tax. If the prevailing cause of the attribution is a business succession project and not the will to remunerate the work activity, the transfer retains a succession nature and is not taxable as work income.
What was the value of the contested actions in the case examined by the Swiss Federal Court?
In the specific case examined, the manager received 795 registered shares after the death of the entrepreneur. The tax authorities of the Canton of Aargau had initially classified the value of these shares, which exceeded eight million francs, as income from employment, before the decision was overturned by the cantonal judge and confirmed by the Federal Court.

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