An introduction from the far west

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1

Hi All,

My wife and I have only recently discovered the idea of FIRE, although we have always lived a frugal lifestyle. Until now though, savings have just been languishing in the bank as we’ve been reluctant/scared to take the plunge into stock market investing to really make the money work for us. Discovering a resource such as this has got us excited and we think it time to take action.
We are both 37 and immigrants to the region; my wife is working part-time in Vaud, I’m working full-time in Geneva. Our situation is somewhat complicated because we are cross-border workers (“frontaliers”), living in France; we’re hoping someone in the community here might have experience and be able to guide us on any potential traps in our situation.

Currently I am taxed at source; my wife is not. Each year we complete a tax return for the household, where I receive credit for the tax paid in Geneva (ie no tax to pay to France for me) and we pay tax to France based on my wife’s income in Vaud, which is not taxed at source.

Before I go ahead and open an IB account and start buying into some ETFs, I’d like to make sure that we fully understand the implications, especially with regards to future tax obligations/burden. After much reading, if I understand correctly, CGT on stock investments for a Swiss resident is zero? And dividends are taxed? I’m guessing that it won’t be the same for cross-border workers, but I can’t find information that confirms what the situation would be in that case? If we would have to pay tax on our investments to France (and not to Switzerland where our “working life” is), then any ideas how much it would be? If no-one here has specific experience of this use-case, perhaps someone has had a good experience with a financial advisor down this way that they could recommend please?

I’m basically just trying to figure out what the best way forward is…

Thanks for reading and we look forward to our journey towards FIRE along with the rest of you!
GenevaFIRE

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I don’t know what you will have to declare in France, but:

  • Capital gains and dividends are both taxable income in France
  • if i am not mistaken since Macron’s reform taxable income from stocks is taxed at a flat rate of 30% (including 18% of “contributions sociales”)
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If you’re taxed in France, it’s probably much better to find some local resources (it should be fairly different than here).

From my very vague understanding:

  • a PEA might help getting some tax advantage, but from what I understand the investment universe might be limited (e.g. can you invest in an all world ETF?)
  • you won’t have access to US stocks with low TER/low transaction costs due to the EU regulation (MiFID II) – (in the past you could even had reclaimed the US withholding similar to how swiss people do, but now no broker will sell you those ETFs)
  • while a life insurance might sound interesting due to tax advantage, the high fees eats all the advantages (and I feel like they want to sunset the tax advantage anyway)
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Thanks to you both. Yeah I’m thinking an independent financial advisor down this way who know the ins and outs of cross-border treaties etc would be the way to go. Am hoping that someone in this community has dealt with an advisor in Geneva or surrounding areas and can provide a recommendation…

Thanks again!

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How tight are your ties with France? I assume as of now it comes out cheaper to pay tax in France, as cheaper housing and much lower daily expenses will compensate for that, but once sizeable investments come to play, you may be better off at the Swiss side of the border.

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That’s basically my thinking at the moment. Our first 2 years in the area we lived in Nyon; then once we decided to stay for good, my Anglo-Saxon side had major issues at continuing to pay rent forever, so we wanted to buy. The only way that was possible was in France, since we didn’t have the huge Swiss deposit required. So in 2010 we bought our apartment in France, with the goal of keeping that as an investment for the future too. However, now some years later and with savings and the 2eme pillar built up, we could potentially move back across the border if we find a good deal to buy. Just trying to figure out at the moment whether the costs associated with that are less than the future tax burden of staying in France and ETF investing from there.

Also, I’ve been directed to this site showing that it’s not possible for retail investors resident in the EU to invest in US ETFs anymore. That’s an issue since it seems like the best buy-and-hold ETFs for the FIRE game are those US ones. I guess everyone in this community is CH resident so is not impacted, but in the different FIRE blogs across the EU or among your network, has anyone found a workaround to this? It may be another reason to move back to CH…

Cheers!

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Note that real estate market (and rent vs. buy decisions, incl. the tax incentives) might differ between countries so buying may not be the most rational decision (I suppose there’s tons of threads on the forum covering that already :slight_smile:)

Regarding MiFID II, I’m not aware of a simple workaround. I actually got curious since in many countries a workaround is to be classified as a professional investor, but in France they ensured it wouldn’t be possible as the classification ensures that basically no regular individual qualifies.

So basically you’ll have to weight the cost of living difference in CH, vs. what you save in taxes and investing fees lowered by something ~0.1 or 0.2%. (in addition to the fact that without US ETFs, the US withholding tax is not recoverable).