The rule: private capital gains are tax-free
If you sell shares you hold privately, the gain is generally not subject to income tax in Switzerland. That applies to listed shares in your portfolio and to shares in your own company alike. How the rule works for ordinary investors, and where it ends, is covered in our guide to taxes on your investment portfolio and in our article on professional securities dealing.
For owners of a company, the tax-free gain is often the largest single amount they ever realise. That is exactly why the law contains two exceptions. Both are in Art. 20a of the Federal Act on Direct Federal Taxation, with a matching rule for cantonal tax in the tax harmonisation act. They catch situations in which a sale price is in substance a dividend.
Why the exceptions exist
A company that has accumulated profits can pay them out as a dividend. A dividend is taxable income. If you instead sell the company to a buyer who then takes those same reserves out to pay you, you would have received the reserves as a tax-free sale price. The two exceptions close this gap: one for sales to third parties, one for sales to yourself.
Exception 1: the indirect partial liquidation
Part of the sale price becomes taxable investment income (indirekte Teilliquidation) only if all of the following conditions are met. The Federal Tax Administration (ESTV) explains each of them in its Circular No. 14 (PDF in German):
- A sale of at least 20 percent of the share capital. Several smaller sales within five years count together once they reach 20 percent, and so do joint sales by several shareholders who act together.
- From private to business assets: you held the shares privately, and the buyer, a company or a self-employed person, holds them as business assets.
- A distribution within five years of the sale. Besides formal dividends, this includes hidden profit distributions, loans to the buyer that are unlikely to be repaid, or guarantees for the buyer's debt.
- Substance that already existed: what is paid out must have been present at the time of the sale, distributable under company law and not needed for the business. Ordinary dividends from profits earned after the sale do not count.
- Your involvement: you know or should know that money is taken out of the company to finance the price and is not put back.
Involvement is broader than many sellers expect
Involvement can be active, for example if you grant the buyer a loan for part of the price, pledge the sold shares for the buyer's bank loan or agree to turn company assets into cash before closing. It can also be passive: if the buyer clearly cannot pay the price from its own means, or if you know that it plans to merge with your company. According to Circular No. 14, pointing to the buyer's financial strength alone is not enough to rule out involvement.
How much becomes taxable
If a qualifying distribution happens, the taxable amount is the smallest of four figures, in proportion to the stake you sold: the sale price, the distribution, the reserves distributable under company law and the non-operating substance. Your nominal value does not reduce the sale price in this calculation. The income belongs to the tax year of the sale. If that year is already assessed, the tax is collected afterwards in a supplementary tax procedure.
Example 1: Reto sells his engineering firm
Reto owns 100 percent of an engineering company with share capital of CHF 100,000. He sells it from his private assets to a corporate buyer for CHF 3 million. At the time of the sale the company has reserves of CHF 1.8 million that are distributable under company law. Of its assets, CHF 1.2 million are surplus cash and securities that the business does not need. The buyer funds the purchase with a bank loan and, a year later, has the company pay a dividend of CHF 1.5 million to repay that loan. Reto had agreed to receive part of the price later, which amounts to a seller loan, a typical sign of involvement.
- Sale price: CHF 3,000,000
- Distribution: CHF 1,500,000
- Distributable reserves: CHF 1,800,000
- Non-operating substance: CHF 1,200,000
The smallest figure is CHF 1.2 million. That part of Reto's price is taxed as investment income in the year of the sale. Because he held more than 10 percent, the federal tax applies to 70 percent of it, and the cantons tax at least 50 percent. The remaining CHF 1.8 million stays a tax-free capital gain. Had the buyer only paid out profits earned after the sale, nothing would have been taxable.
Exception 2: the transposition
The second exception (Transponierung) applies when you transfer shares from your private assets to a company in which you hold at least 50 percent after the transfer, typically your own holding company. Whatever you receive in total above the nominal value of the transferred shares plus their capital contribution reserves is taxable investment income. Since 2020 there is no minimum size for the transferred stake.
The logic: you remain the economic owner on both sides. If your holding pays you more than the nominal value and the capital contribution reserves, you have converted company reserves into private money without a taxable dividend. The law treats that excess as a dividend.
Example 2: Petra sets up a holding
Petra owns all shares of a trading company: nominal value CHF 100,000, capital contribution reserves CHF 50,000, market value about CHF 900,000. She founds a holding company that she owns 100 percent and sells it her shares for CHF 900,000, credited to her as a loan from the holding.
- Total consideration: CHF 900,000
- Nominal value plus capital contribution reserves: CHF 150,000
- Taxable investment income: CHF 750,000
Petra would pay income tax on CHF 750,000, with partial taxation as in Reto's case. If she instead transfers the shares for a total consideration of no more than CHF 150,000, this rule does not apply to the transfer. How the holding then books the rest, and what that means for later payouts, is a question for the planning and the ruling, not for a rule of thumb.
Real estate companies: a different tax
If the company you sell mainly holds property, a cantonal tax can come into play instead. Selling control over a real estate company is treated like selling the property itself, and the canton charges real estate gains tax (Art. 12 para. 2 of the Tax Harmonisation Act). Cantons can also tax transfers of shares in real estate companies more broadly under their own law. Selling individual listed shares of a real estate company does not trigger this tax. How the real estate gains tax is calculated, and how to reduce it, is explained in tax tip 5 on real estate gains tax.
Protecting yourself in the share purchase agreement
Because the indirect partial liquidation depends on what the buyer does after closing, many sellers address it in the contract. A common approach is a clause in which the buyer commits not to distribute substance that existed at the sale for five years, and to compensate the seller for any tax that results if it does anyway. Such a clause does not change the tax law. It shifts the financial risk to the party that controls it. Check the wording with your advisor, because what counts as non-operating substance is a matter of valuation.
Clean books help on both sides. A balance sheet that clearly separates operating and non-operating assets makes the discussion with the buyer and the tax authority easier. If your company's accounting is not yet in that shape, our accounting service for companies is a practical first step.
Get a ruling before you sign
For a larger share sale, a transfer to your own holding or the sale of a real estate company, ask for a written advance ruling (Steuerruling) before you sign. For direct federal tax it is issued by the cantonal tax authority responsible for you, not by the ESTV. A ruling binds the authority if it concerns your concrete, planned case, the authority was competent, you could not easily see that it was wrong, you made arrangements relying on it and the law has not changed in the meantime. It protects you only for the deal as you described it. Those conditions come from the protection of good faith in the Federal Constitution, as the ESTV sets out in its notice on tax rulings (PDF in German).
One limit matters for the indirect partial liquidation. Before the sale, a ruling can confirm the objective elements: the sale, the switch to business assets, the 20 percent stake, the time limit and the distributable reserves. Whether you were involved can only be judged once a concrete distribution is on the table. If the buyer's financing plan is part of your request, the ruling can address it.
Every case is different, the potential usually is not
Whether a sale is affected depends on the buyer, the financing, the balance sheet of your company and what happens in the five years after closing. This article sets out the principles and two simplified examples; it does not replace individual advice.
What does generalise: the tax result of a company sale is decided before signing, in the structure and the contract, not afterwards in the tax return. If you are preparing a sale or a holding structure, our tax advisory reviews the deal with you, and our financial advisory helps you plan what happens with the proceeds. If your company is based in Zug, our page on tax advisory in Zug covers the local side.
Related FIN services
- Tax Return Switzerland
- Financial Advisory
- Swiss Accounting
- Taxes on your investment portfolio
- Professional securities dealing
- Tax advisory in Zug
Status October 2026, tax year 2026. This article is for general information and does not replace individual tax or legal advice. The tax treatment depends on the specific facts and the practice of the competent cantonal authority.