Global BV News: New methodology for tax valuation of unlisted shares in Switzerland

BVWireIssue #236-3
May 18, 2022

global business valuation
cost of capital, global business valuation education, international business valuation

The application of different valuation bases has a significant impact on the wealth tax value of unlisted shares in Switzerland, according to an article from KPMG. One decisive factor is the capitalization rate. According to the guidelines (known as KS 28), the enterprise value is calculated (with some exceptions) by weighting the capitalized earnings value twice and the net asset value once. To determine the capitalized earnings value, the average annual profit (of the last two or three years, depending on the valuation model) is divided by the capitalization rate.

The capitalization interest rate is composed of the interest rate of a risk-free investment and the risk premium applicable to unlisted companies (including a surcharge for illiquidity) and is published annually in the price list of the Federal Tax Administration (FTA). On Dec. 1, 2021, the Swiss Tax Conference published a new methodology for determining the capitalization rate for the valuation of nonlisted shares. The capitalization rate has increased to 9.5%, and, consequently, the company values will decrease (all else being equal). The FTA will publish the rate for valuations each year.

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