6 month holding rule clarification

Taxes
1

How is the 6 month rule applied when holding securities?

I’m specifically thinking about the following scenario:

I put in 10k into an etf and then dca 1k over the next year, now I want to sell it:

  • Can I sell all of it without violating the rule?

  • Can I sell part of it? Like all the shares that I have held for 6 months? IBKR does FIFO right? So i would need to write down how man shares I bought and then only sell as many I have bought 6 months+ ago.

  • Or do i need to wait 6 months since the last purchase?

Im thinking of a scenario where I buy a big portion of KMLM when I get my bonus and then dca until ear end and then sell it right before the dividend date to get around the US withholding tax (Im still taxed at source, so cant claim it back) and then bu a different fund. KMLMs distributions arent dividends, so no swiss tax avoidence here, just US taxes that I want to avoid in this particular case.

Ideally I would do this every year and switch between two similar funds or something along these lines.

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2

I think IBKR gives you the choice, but that’s focused on the US where there is a capital gain tax.

But I remember on this forum somebody gave a link to a concrete case in Switzerland where the official decision on professional trader status was based on FIFO and across all banks.

I would be careful about selling right before the dividend date and systematically, because the tax office could see it as an attempt to avoid taxation and still tax it. Not sure what the US would say for their withholding tax but personally I would refrain from this kind of optimization.

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3

I always wondered about this. Some countries have very specific rules about allocating shares sold for tax purposes. I’m not sure what rules if any exist for CH and whether you are free to choose which shares are sold for tax purposes.

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4

That’s also what Im wondering. If there is no rule preventing me from selling right before the dividend date and I just have to adhere to the 6 month rule(and the other rules of course). Why should I not be allowed to do that?

The tax office can only operate inside the law and not because they feel like Im a tax avoider. Of course I dont want to really let it come to that confrontation…

5

By “the rule” I assume you mean one of the criteria cited in the 2012 Kreisschreiben about potentially being classified as a professional trader if selling securities held for less than 6 months?

I discussed this as recently as this week with a very seasoned colleague of mine whose father happened to be a tax advisor for many decades.
According to this colleague, the Steuerkommissär looks at the collective of your activities to decide whether this is a self-employed task/activity to generate income. The Steuerkommissär will use the criteria cited but its at their discretion to come to a conclusion from an overall impression.
This colleague also guesses that an occational violation of a criteria will be tolerated as long as it’s not evident that you are trying to create income with a violation … and as long as the Steuerkommissär doesn’t have a bad day. :wink:
This colleague also knows from his father, the tax advisor, that most Steuerkommissäre can be reasoned with.

If still in doubt I would recommend that you talk to the tax authority person handling your taxes (they’re either listed on your previous tax bill or you can call the tax authority and they’ll connect you with “your” person or will give you a direct number.
This person is not the Steuerkommissär but they will be able to give you guidance, and I’m pretty sure if they are in doubt they will doublecheck with an actual Steuerkommissär.

To add a tad of personal experience color: I was audited last year by a Steuerkommisär for my 2022 tax returns.* The Steuerkommissär looked in very much detail at all of my trading activities (trades, dividends, etc) and I know I have violated rule 5 (roughly: “derivatives, especially options, can only be used as hedges of existing positions”) as since 2020 I do Stillhaltergeschäfte (I have sold Puts both to generate income** as well as to buy stakes in companies). I do try to have only a few Puts on my year end statements to fly below the radar, but I have had short Puts that were clearly not for hedging my positions. Despite those evident violations of rule 5, the Steuerkommissär had no complaints about this.

* Most likely triggered as I (truly) forgot to declare an unverteilte Erbschaft of my wife.
** Slightly orthogonal to the question about whether this makes you a professional investor: as I have also learned very recently on a different thread on this forum, by selling Puts I have not generated income, I’ve only made capital gains. Works for me.

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6

Thanks for your thorough answer, really helpful :slight_smile:

I guess it would seem very fishy to them if I would sell increasingly bigger parts yearly, right before the dividend date. But on the othe rhand, it’s not to generate income, money wont leave my brokerage for years to come and will only have inflows…

7

I think the zurich court used the first in first out rule to interpret the rule. I have not seen a federal court decision on this.

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9

Conveniently I live there :smiley:

So that is the minimum you have to adhere then. So selling the 6 month old shares yearly might be a feasible option. have two similar funds, switch all 6 month old shares between them. This would get you like 50% less withholding tax probably. So not all, but more efficient and is inside the rule framework.

10

My goal would be to not have to go to court about this, so I would try to clarify beforehand with the tax person handling your case, or the Steuerkommissär if things are more complicated.

But thanks for linking the court case.

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12

It’s hard to say, from a distance. My gut feel is that they would glance over this, especially if your “gains” from this only make up a negligible part of your income (basically, if it’s evident this isn’t your main scheme to make a living, i.e. you’re employed and mainly generate income that way).

Of course, I don’t know shit about this, so consult your tax advisor or … simply call the tax authorities up for their opinion on things. I did so on several occations (though not for the same reason as yours). They’re friendly. :slight_smile:

15

I realized that I reacted on posts that were 2 months old and that I had already said the same thing in the same thread. I didn’t mean to make you delete your post, @oslasho, apologies!

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