As indicated Swiss investors are taxed on the interest received, while capital gain/loss are not taxable/deductible. Accrued interest at purchase/sale are included in the capital gains/loss computation.
To avoid the loophole on zero bond issued with a disagio, the capital gain at redemption/sale is taxable (and the loss deductible).
However, the cantons may provide an exemption on interest income up to a certain amount (cantonal and communal taxes only).
Vaud → the first CHF 1’600 for a single person (code 480) are tax free
Genève → CHF 2’232 for a single person (code 56.30).
It is doable, but would suggest you need more than just the tax savings to make it worthwhile, the tax is an optimisation in the portfolio that can boost the net return a lot, but you still need the right reasons and parameters to be investing in single bonds.
I’ve been focussing on low and zero coupon bonds (issued at least at par) and found I can lock-in 80% of my return as tax free capital gain while still having enough issues to chose from to get acceptable liquidity, spread and price.
Swissquote flat trades at 39chf mean you can achieve an all-in cost of about 0.2% of 50k nominal purchase and if you plan to hold to maturity no exit costs.
One example would be T-Bill, right? Quick google confirmed that they are indeed zero coupon bonds.
ps. it’s just your phrasing got me confused: 0 cupon issued at 100%, who would buy that I probably would say 100% face value, issued at discount (ie 91%) and bought price anything below 100%.
Oh wow, I thought only secondary market yield went under 0. Anyway, could you confirm that us T-Bill essentially for CH investor would be tax free? What @oslasho is stating seems contradicting this.
Hello everybody and thank you for the interesting discussion.
I would like to ask you about a practical example to be sure I understood correctly what’s above
Lets consider the following Italian Government Bond available on DeGiro Btp Tf 0% Dc24 Eur IT0005474330
Issue Date: 16 Dec 2021
Issue Price: 100,29 euro
Maturity Date: 15 Dec 2024
Coupon: 0%
Last Price: 95 euro
Yield: 3.6%
Investing in this bond would be tax-free? As the bond was issued above par an is zero coupon, correct?
Thank you very much
EDIT: I don’t know why my post was flagged as Spam as it’s not and advertisement neither promotional in nature. It is just an example to understand how the taxation would work on bonds in Switzerland
To better understand the general case, lets consider also this similar coupon bond: Btp Tf 0,35% Fb25 Eur IT0005386245
Issue Date: 01/10/2019
Issue Price: 100,50 euro
Redemption Price: 100 euro
Maturity Date: 01/02/2025
Coupon: 0,35%
Last Price: 95,04 euro
Yield: 3.56%
How much would the 2 different bonds be taxed, and so, what would be the Net Yield?
Thanks a lot!
EDIT: I don’t know why my post was flagged as Spam as it’s not and advertisement neither promotional in nature. It is just an example to understand how the taxation would work on bonds in Switzerland
I see this argument many times since inflation is a bit higher, I’m not sure what the point is. Fixed income/bonds will be better than cash, have low volatility and helps with wealth preservation.
Yes it should often be part of a diversified portfolio (as it will dampen the volatility of riskier asset classes). Why always bring that up? To induce fomo?
I managed with some US treasury notes that were issued during covid times (~0% rates).
For example the 3-year US91282CCC38 with a coupon of 0.25% issued in May 2021 and maturing May 2024 (around when 2023 taxes are due )
So if you bought 1 year ago it would converge to par (~5% return) with coupon of just 0.25%. So roughly on 5.25% return you paid marginal tax on just 0.25%.
At fun Geneva 50% marginal that’s 0.125% tax on 5.25% return.
I think this is due to nature of TIPS. Otherwise the rule is that >50% of the total returns of a bond (from time of issuance to redemption) needs to come from discount for IUP rule to apply.
Thanks for sharing. Interest information for Inflation linked bonds.
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