Facts
The case concerns the question of whether the value of employee stock options that are subject to a blocking period (vesting period) belongs to the relevant salary and thus to the income subject to contributions in the Old Age and Survivors' Insurance (AHV). The appellants J. and V. had filed a complaint against a decision of the Compensation Fund of the Canton of Zurich, which had qualified the value of 20,000 employee stock options allocated on October 24, 2001 as income subject to contributions.
The Federal Court had to decide whether the administrative practice, according to which the value of vested but not yet exercised employee stock options is already considered as contributory salary at the time of allocation, is lawful or whether the obligation to pay contributions only arises upon the actual exercise of the options.
Considerations
The Federal Court states that according to the case law of the Federal Court and the practice of the Federal Tax Administration (FTA), income is only considered realized for tax purposes when the taxpayer can actually dispose of it. Mere entitlements to salary are not considered realized.
The FTA has repeatedly changed its practice on the taxation of employee stock options. Since May 2003, it has been the case that employee stock options with a vesting clause are only taxed at the time of their actual exercise, as until then there is only a suspensively conditional entitlement.
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