Investing money you'll owe in taxes

In Vaud, you have until June 30 to send your tax declaration. From my experience, the canton tells you what you owe them around the end of the year, and sometimes even the year after.

I’m in a situation where my monthly payments are much lower than what I owe in taxes, because a large portion of my compensation is in RSUs (stocks), which I typically sell part of to cover taxes. This means that I constantly have 30-70k sitting in my bank account waiting to be paid in taxes.

Any thoughts and recommendations on investing it? I would typically be able to invest it for 1-2 years.

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“safe” investment:


You can basically do two things, or a combination of these two:

  1. “Safe” option: Look for a good savings account to park your money. Interest rates up to 2 % at the time of writing. Note that the return is taxable.
    Short guide to CHF fixed income options - Wiki - Mustachian Post Community
  2. “Riskier” option: Invest your money in ETFs and take out a margin loan to pay your tax bills. Then pay back the margin loan when money comes in. At the time of writing, the margin rate for IBKR is 3%. The current rate can be found here: Margin Rates and Financing | Interactive Brokers U.K. Limited. Please note that the interest cost can be deducted from your income, so the after-tax rate might be 20-30 % lower.

Third option: pay the taxes in advance? Not sure how much in interest Vaud charges on this kind of ‘unpaid/late’ taxes, but I’ve lived in places where it can be quite high.

Of course, that’s option 3.
Or option 4: pay taxes late and keep the money invested because interest on late payment could be lower than expected returns. Check on your canton’s website.

Actually, this thread could be merged with either of these two:
Final tax bill timing - Taxes - Mustachian Post Community
Timing tax payments - Taxes - Mustachian Post Community

0.3% until Final Bill for Vaud.

If you need to take money out in 1-2 years then I suggest
1- Short term bonds with maturity date before the time you need the money
2- Money market funds
3- Bank fixed deposits

You cannot really invest in stocks because of volatility.

Then it doesn’t seem worth it. There are ‘safe’ investments that yield more than that.

What percentage of your assets is this? If you can cover even if your investment drops, then why not allocate it to your portfolio? It behaves a bit like free leverage for a fixed amount and a fixed term (you can’t deleverage).

If this would lead to undesirably high leverage, then one of the safe options named in this thread would be better.

Just a quick note - as far as I know the date is 15.03 and to be able to send declaration without consequences until 30.06, you have to fill simple and automatically processed online form. Not sure though what happens if it’s not done and you send the declaration later than 15.03.