22 July 2026 | Legal Insight
Swiss Federal Supreme Court clarifies
the limits of gift taxation for share
transfers below fair market value under
shareholders' agreements
22 July 2026 | Legal Insight
Swiss Federal Supreme Court clarifies
the limits of gift taxation for share
transfers below fair market value under
shareholders' agreements
In its decision of 22 April 2026 (9C_118/2025), the Swiss Federal Supreme Court held that the transfer of shares in a family holding company at nominal value pursuant to a shareholders' agreement did not constitute a taxable mixed gift (gemischte Schenkung / donation mixte) under cantonal law. This was despite a substantial difference between the agreed purchase price and the shares' fair market value.
The Court emphasised that a mixed gift requires not only an objective imbalance between the value transferred and the consideration received, but also genuine animus donandi (intent to make a gift) - an intent that cannot be present where the transfer is attributable to the performance of a contractual obligation.
The judgment provides welcome additional guidance for family businesses and succession planning.
Background
A family holding company was incorporated in 2007 by a father (60%) and his two sons (20% each). In 2008, all shareholders entered into a shareholders' agreement providing that, upon the death or withdrawal of a shareholder, the remaining shareholders may exercise their right to acquire the departing shareholder's shares at nominal value.
In 2017, one son withdrew from the company and transferred his shares to the father for their nominal value (CHF 20'000). At that time, however, the shares had significantly increased in value, with a tax value exceeding CHF 6'800'000.
The cantonal tax authorities considered the difference between the fair market value and transfer price as a taxable mixed gift and imposed gift tax, as well as a penalty for tax evasion. The cantonal court confirmed the assessment.
The Court's reasoning
The Swiss Federal Supreme Court overturned that decision, holding that a mixed gift requires both an objective disparity between the value transferred and the consideration received, and a subjective intent to enrich the recipient. While a close family relationship may justify the presumption of an animus donandi, that presumption can be rebutted. According to the Court, the transfer of shares could not be viewed in isolation, but had to be assessed in the context of the shareholders' agreement:
In these circumstances, the Court concluded that the contractual arrangement was not primarily intended to enrich the remaining shareholders gratuitously. The mere fact that the fair market value later significantly exceeded the contractual price was therefore insufficient, on its own, to establish a taxable mixed gift. Since no taxable gift existed, the tax evasion penalty fell away as well.
Practical implications for family businesses and succession planning
The judgment provides welcome guidance for family businesses and succession planning by confirming that a transfer of shares below fair market value under a shareholders' agreement does not automatically constitute a taxable gift. The decision does not, however, create a general safe harbour for transfers below fair market value. The existence of a taxable gift will continue to depend on the specific facts, particularly whether the transfer mechanism is genuinely commercial or is designed to benefit a particular family member. Furthermore, the necessity of the animus donandi was emphasised, which is e.g. generally not presumed between unrelated shareholders or management shareholders. Since gift tax is regulated at a cantonal level, the applicable laws must be reviewed and analysed in each specific case.
Earlier case law had already recognised that a book-value exit clause applying equally to all partners of a partnership did not constitute a gift because it merely implemented a pre-existing contractual arrangement (BGE 98 Ia 258). The present decision extends that reasoning to corporations and family-owned holding companies.
The judgment confirms that transfer restrictions and pricing mechanisms may pursue legitimate commercial objectives beyond the transfer of wealth within a family. Exit provisions at nominal value or pursuant to pre-determined formula valuations may serve to preserve a stable shareholder base, facilitate succession, avoid costly valuation disputes and ensure business continuity.
This decision also highlights the importance of timing. In this case, the shareholders' agreement had been concluded almost a decade before the transfer, at a time when the company's future value was uncertain. This strengthened the argument that the agreed pricing mechanism reflected long-term commercial planning rather than an intention to make a gift. Conversely, transfer restrictions that are introduced or materially amended only once a significant increase in value has become foreseeable or shortly before a transfer are likely to attract closer scrutiny from the tax authorities.
The reasoning may also be relevant, by analogy, for employee participation and management equity arrangements containing compulsory transfer or buy-back provisions at pre-determined formula values. While these arrangements are generally analysed under the employment income tax rules rather than gift tax rules, the Court's reasoning confirms that pre-agreed and commercially justified pricing mechanisms do not, in themselves, indicate an intention to make a gift.
This may be particularly relevant where individuals act simultaneously as shareholders, family members, directors and employees, making careful drafting and documentation essential to distinguish employment income, hidden profit distributions (e.g., where the company itself acquires shares at an inflated price) and potential gifts. Family businesses should therefore review their shareholders' agreements and buy-back provisions to ensure that transfer restrictions and pricing mechanisms are supported by a clear commercial rationale, apply consistently among shareholders and are appropriately documented.
The Court emphasised that a mixed gift requires not only an objective imbalance between the value transferred and the consideration received, but also genuine animus donandi (intent to make a gift) - an intent that cannot be present where the transfer is attributable to the performance of a contractual obligation.
The judgment provides welcome additional guidance for family businesses and succession planning.
Background
A family holding company was incorporated in 2007 by a father (60%) and his two sons (20% each). In 2008, all shareholders entered into a shareholders' agreement providing that, upon the death or withdrawal of a shareholder, the remaining shareholders may exercise their right to acquire the departing shareholder's shares at nominal value.
In 2017, one son withdrew from the company and transferred his shares to the father for their nominal value (CHF 20'000). At that time, however, the shares had significantly increased in value, with a tax value exceeding CHF 6'800'000.
The cantonal tax authorities considered the difference between the fair market value and transfer price as a taxable mixed gift and imposed gift tax, as well as a penalty for tax evasion. The cantonal court confirmed the assessment.
The Court's reasoning
The Swiss Federal Supreme Court overturned that decision, holding that a mixed gift requires both an objective disparity between the value transferred and the consideration received, and a subjective intent to enrich the recipient. While a close family relationship may justify the presumption of an animus donandi, that presumption can be rebutted. According to the Court, the transfer of shares could not be viewed in isolation, but had to be assessed in the context of the shareholders' agreement:
- The transfer mechanism applied equally and symmetrically to all shareholders.
- At the time the agreement was concluded, the future appreciation of the company was uncertain.
- The clause pursued legitimate commercial objectives, including preserving a stable family shareholder structure and ensuring continuity of ownership.
- The same transfer obligation would have applied to the father if he had been the departing shareholder.
In these circumstances, the Court concluded that the contractual arrangement was not primarily intended to enrich the remaining shareholders gratuitously. The mere fact that the fair market value later significantly exceeded the contractual price was therefore insufficient, on its own, to establish a taxable mixed gift. Since no taxable gift existed, the tax evasion penalty fell away as well.
Practical implications for family businesses and succession planning
The judgment provides welcome guidance for family businesses and succession planning by confirming that a transfer of shares below fair market value under a shareholders' agreement does not automatically constitute a taxable gift. The decision does not, however, create a general safe harbour for transfers below fair market value. The existence of a taxable gift will continue to depend on the specific facts, particularly whether the transfer mechanism is genuinely commercial or is designed to benefit a particular family member. Furthermore, the necessity of the animus donandi was emphasised, which is e.g. generally not presumed between unrelated shareholders or management shareholders. Since gift tax is regulated at a cantonal level, the applicable laws must be reviewed and analysed in each specific case.
Earlier case law had already recognised that a book-value exit clause applying equally to all partners of a partnership did not constitute a gift because it merely implemented a pre-existing contractual arrangement (BGE 98 Ia 258). The present decision extends that reasoning to corporations and family-owned holding companies.
The judgment confirms that transfer restrictions and pricing mechanisms may pursue legitimate commercial objectives beyond the transfer of wealth within a family. Exit provisions at nominal value or pursuant to pre-determined formula valuations may serve to preserve a stable shareholder base, facilitate succession, avoid costly valuation disputes and ensure business continuity.
This decision also highlights the importance of timing. In this case, the shareholders' agreement had been concluded almost a decade before the transfer, at a time when the company's future value was uncertain. This strengthened the argument that the agreed pricing mechanism reflected long-term commercial planning rather than an intention to make a gift. Conversely, transfer restrictions that are introduced or materially amended only once a significant increase in value has become foreseeable or shortly before a transfer are likely to attract closer scrutiny from the tax authorities.
The reasoning may also be relevant, by analogy, for employee participation and management equity arrangements containing compulsory transfer or buy-back provisions at pre-determined formula values. While these arrangements are generally analysed under the employment income tax rules rather than gift tax rules, the Court's reasoning confirms that pre-agreed and commercially justified pricing mechanisms do not, in themselves, indicate an intention to make a gift.
This may be particularly relevant where individuals act simultaneously as shareholders, family members, directors and employees, making careful drafting and documentation essential to distinguish employment income, hidden profit distributions (e.g., where the company itself acquires shares at an inflated price) and potential gifts. Family businesses should therefore review their shareholders' agreements and buy-back provisions to ensure that transfer restrictions and pricing mechanisms are supported by a clear commercial rationale, apply consistently among shareholders and are appropriately documented.
