Transposition (German Transponierung) is a Swiss tax mechanism that recharacterises as taxable investment income the gain realised when a shareholder sells a participation held in private wealth to a company they control. Set out in article 20a of the Federal Direct Tax Act (LIFD), it prevents converting a future taxable dividend into a tax-free private capital gain. The excess of the sale price over the sum of par value and qualifying capital contribution reserves is taxed as income.

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It is typically triggered when an owner sells the shares of their operating company to an acquisition holding (NewCo) they own, at a price above par value. Since the reform effective in 2020, the former 5% minimum participation threshold has been removed: transposition applies regardless of the stake transferred. It is a central point of attention in any restructuring preceding a sale.

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Example: a shareholder sells 100% of the shares of their SME, par value CHF 100,000, to their personal holding for CHF 3.0 million. With no contribution reserves, the CHF 2.9 million excess is taxed as investment income, a significant tax charge that anticipated structuring could have avoided.

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At Hectelion, we identify transposition risk ahead of every Franco-Swiss restructuring and coordinate the structuring with tax counsel to secure the transaction.