Employee Participation

About the job

On the way to individual taxation: Instruments

Once individual taxation is introduced at the federal and cantonal levels (at the latest from 1 January 2032), spouses will each have a tax return according to ...

The information sheet on the taxation of employee participation has been adapted by the cantonal tax administration of Schwyz. The legal basis has remained unchanged. The adjustments mainly concern the distinction between employee participation and a succession arrangement, as the tax consequences can differ.

Employee participation allows an employer to bind an employee more closely to the company, increase motivation, or simply to promote the corporate culture. Often, this can increase productivity and/or reduce turnover. The incentives usually consist of sharing in the company’s success. Although there are many conceivable forms of employee participation, they all have in common that the work performance and the employment relationship are paramount. When the employment relationship ends, the participation usually has to be sold again under previously defined conditions.

A succession arrangement in this context goes beyond this. The focus here is less on work performance and the employment relationship, but rather on entrepreneurship, on the continuation of a business owner. The idea: a predestined employee acquires their own employer. Unlike ordinary employee participation, 100% of the shares are acquired without an obligation to return them, although the acquisition can also be staggered.

From a tax law perspective, the fundamental difference is that employee participations can represent taxable income from employment both when purchased and sold. Transactions (purchase and sale of the participation) that qualify as succession arrangements are generally tax-free.

The revised information sheet thus supplements the generally applicable circular no. 37 of the Federal Tax Administration. It is effective immediately (publication 18 November 2025).