How to value a company for the Swiss tax return?

For Swiss wealth tax purposes, non-listed company shares are valued using the Praktikermethode as prescribed by Tax Circular No. 28. The cantonal tax authority calculates this value annually and applies it to determine your wealth tax liability. ### Technical Explanation #### The Annual Valuation Process 1. Tax Circular 28 mandates the Praktikermethode for all cantons 2. Capitalization rate is published annually by SFTA (Eidgenössische Steuerverwaltung) 3. Earnings basis: Average of last 2-3 years of reported net profit (NOT normalized EBITDA) 4. Asset basis: Statutory book equity (NOT fair market value) 5. Formula: (2 × Ertragswert + 1 × Substanzwert) ÷ 3 #### Cantonal Variations * Zurich, Bern, Aargau: Apply standard Circular 28 without modification * Zug, Nidwalden, Schwyz: May apply cantonal discounts (10-30%) on the calculated value * Geneva, Vaud: Sometimes use alternative methods for specific industries * Appenzell Innerrhoden: Known for generous valuations (low wealth tax rates) The same company can have a tax valuation that varies by 20-40% depending on cantonal domicile. #### Legal Optimization Strategies 1. Earnings suppression (legal): Maximize deductible expenses — owner compensation at the high end of defensible range, accelerated depreciation, generous provisions for maintenance and warranties 2. Asset minimization: Pay down equity through dividends (note: dividend taxation), keep retained earnings low through strategic distributions 3. Holding structure: Transfer operating company shares to a holding company — the holding's tax value reflects the operating company's tax value minus a participation deduction 4. Real estate separation: Separate property into a distinct entity to prevent real estate appreciation from inflating operating company tax value #### The Tax-Exit Paradox Strategies that minimize tax valuation (earnings suppression, aggressive depreciation) directly conflict with sale preparation (earnings maximization, balance sheet cleanup). This is why the 24-month pre-exit runway is essential — you need time to transition from tax minimization to value maximization.