Hi all. Planning to invest in stocks of Swiss companies as a nonresident. Have never been to Switzerland and have no relation to the country. Have questions on taxation. Firstly, does the Swiss generous no capital gains on stocks policy apply to nonresidents selling Swiss stocks? Secondly, what is the Swiss withholding tax rate on dividends for nonresidents holding Swiss stocks?
P.S. I am aware that I have to pay taxes in my country. I’m just interested in Swiss taxes
Switzerland won’t tax you on capital gains. However, if your country of residence taxes you on capital gains, that presumably applies to all stocks including stocks of Swiss companies.
The Swiss withholding tax rate (in German it’s called ‘Verrechnungssteuer’ here) is 35%.
If your country has no double tax treaty with Switzerland, you‘ll lose 35% of your dividend payments. And even with a treaty, you might not recover everything.
If your country has no capital gains tax, you can circumvent that by selling before ex-date and re-buying on the date at a lower price, when the dividend was paid out.
Beware of spread though with illiquid stocks.
Most tax offices won’t like that and if being made aware of it will classify it as tax avoidance (best case you just pay the tax you tried to avoid, worst case might depend on countries, not every country is as lenient as Switzerland).
(not sure about all the other countries, but in the swiss case, if something is done with no financial reason other than avoid a tax, the tax office will consider it as being illegal and reclaim the tax, I can try finding the case law again)
edit the official definition of tax evasion seem to 100% match what was suggested here:
Le Tribunal fédéral caractérise un tel état de fait comme étant « insolite, inappropriée ou étrange, en tout cas inadapté au but économique poursuivi », choisi « uniquement dans le but d’économiser des impôts qui seraient dus si les rapports de droit étaient aménagés de façon appropriée » et aboutissant effectivement « à une notable économie d’impôt dans la mesure où il serait accepté par l’autorité fiscale »
If your country has no capital gains tax whatsover, you are not avoiding anything. The tax office could not care less.
At least in Switzerland dividend stripping is not ok (as quoted above in swiss legal system tax evasion is not about breaking the law but about doing something weird/unusual for the sole purpose of avoiding tax)
I’m fairly sure the tax office would confirm this (afaik there’s case law around that)
If you want to buy Single stocks, most likely you will lose WHT on dividends unless there is a tax treaty.
Would it be not better to look into IE domiciled ETF which buys stocks listed in Switzerland?
Do you specifically want single stocks or whole index works?
Don’t IE-domiciled ETFs lose the full 35% WHT on Swiss stocks? I haven’t looked into it but don’t remember reading about a reduced Swiss WHT for IE funds.
I was under impression there is a treaty rate applied
Yes, but why is this relevant? I’m very aware on how Switzerland handles it for its residents.
We are not talking about Switzerland. OP is not a swiss resident. So the swiss legal system is not relevant for their situation.