Disposal of treasury shares – Landmark decision of the Federal Supreme Court of 6 June 2024

The Federal Supreme Court concluded that at reissue of treasury shares, no taxable capital gain arises. There is no legal basis for a correction in the corporate income tax law. Accordingly, it is not permitted for corporate income tax purposes to deviate from the profit which was determined in accordance with commercial law. This ruling (9C_135/2023) represents an important landmark decision with signaling effect.

What is it about?

The holding company, which is listed on the SIX Swiss Exchange, had repurchased own shares for hedging purposes and for employee participation programs. The allocation of these treasury shares to employees resulted in a positive difference between the value at the time of allocation and the acquisition costs from previous buybacks (surplus). The difference was recognized directly in equity in the legal capital reserve.

The Federal Supreme Court had to rule on the question of whether the surplus arising from the reissue of treasury shares constitutes a taxable capital gain. The Zurich Cantonal Tax Administration and the Swiss Federal Tax Administration («SFTA») referred to the analysis of the Swiss Tax Conference («SSK»), according to which gains and losses from the disposal of treasury shares are to be treated as taxable gains and tax-deductible losses, respectively, regardless of how they are recognized under commercial law. According to the view expressed by the SFTA in the proceedings, it is irrelevant whether and how the reissue of treasury shares is recognized under commercial law, as Art 58 para. 1 lit. c DBG represents a legal basis for correction and deviation from the statutory accounting in the case of a p&l-neutral accounting. However, the Federal Supreme Court did not follow this view.

Change of paradigm with consequences

With the revision of accounting law, there was a shift to the concept commonly used in international accounting (IFRS; US GAAP), according to which the repurchase of treasury shares is economically equivalent to a capital reduction or distribution to the shareholders. Correspondingly, the reissue of treasury shares is treated similarly to a capital increase. According to the view initially expressed by the SSK, this change in accounting law was merely a change in the statutory reporting, which does not affect the tax practice. The SFTA and some academics were also in favor of continuing the previous practice.

Regarding capital tax, however, the Federal Supreme Court already concluded in its leading decision of 14 November 2019 (2C_119/2018) that the previous tax practice cannot be continued. Moreover, the Federal Supreme Court qualified the acquisition of treasury shares for VAT purposes as a capital reduction transaction and not as the acquisition of an asset (2C_891/2020; cf. ADB Newsletter January 2022). Until the ruling of 6 June 2024, however, the question of the corporate income tax treatment of treasury shares remained open.

Judgement of the Federal Supreme Court

The court essentially stated that the chosen method of accounting, which recognized the surplus directly in equity, was in line with commercial law. As treasury shares do not represent an asset in itself, the reissue of treasury shares could not be considered as a capital gain. According to the provision in Art. 58 para. 1 lit. c DBG, an «income» not credited to the income statement is required for a correction. However, no «income» is realized when treasury shares are reissued. In addition, the Federal Supreme Court also rejected the linking of corporate income tax with individual income tax and withholding tax: The systematic connection between withholding tax as well as individual income tax on the one hand and corporate income tax on the other appears too weak to qualify Art. 58 para. 1 lit. c DBG (in conjunction with Art. 20 para. 1 lit. c DBG and Art. 4a VStG) as a provision that allows to deviate from the profit determined in accordance with commercial law. If treasury shares are reissued, this constitutes a tax-neutral capital contribution transaction pursuant to Art. 60 lit. a DBG. The latter should mean in our opinion, that a tax-neutral capital contribution exists for corporate income tax purposes even if the surplus from the reissue of treasury shares is recognized in the income statement.


Due to the pending pilot case on this legal issue, numerous appeals were suspended. This decision has now clarified a fundamental question and initiated a change in practice. Even though this ruling has put another piece of the puzzle in the right place, there are still unanswered questions in connection with the tax treatment of treasury shares, e.g. in the application of the capital contribution principle and also in employee participation programs. We recommend taking this judgement as an opportunity to subject transactions with treasury shares to an in-depth review.


ADB Altorfer Duss & Beilstein AG

Your contact persons, Fabian Duss and Michael Felber look forward hearing from you.