has portfolio of 5m CHF, consisting of 100% ETF on S&P500, he invested couple years ago 2.5M, it went up 100%,
has developed habit of gambling, and every year makes a lot of transactions flipping TSLA, APPL, and some ETF for very short time.
Last point he does on margin, lets say couple times per month, on margin of max 250k CHF. It goes more or less OK, and makes about 30k CHF per year.
150k he earns covers 100% of his needs, he actually is able to save from that, so extra 30k CHF is not income-replacement, but just is reinvested in stonks.
Now would tax office be happy to classify said person as pro?
He does make 30k from gambling on stonks, but actually makes much more (lets say 10% of 5M CHF = 500k) from totally normal portfolio part, held for years. To that normal part he actually does invest his savings from salary.
Would tax office just add 30k to 150k and tax 180k as income?
Second question - lets say that 5M S&P ETF has actually TER of 0.8% and he learned he can buy something much cheaper from Vanguard for 5 bps. He would like to rebalance everything into new ETF.
Would that suddenly add 2.5 M CHF to tax bill?
Third one if you let me is being considered pro one-way street? Once you’re in there’s no way out?
Second, I dont think even then they would classify him as pro. His income is way more than what he earns with the trading.
If you violate only one rule, in this case the 6 months holding rule, you are gucci.
You can even use margin, as long as the margin interest is lower than your total dividend income (iIrc, need to check that again, but there is balance between margin and taxable dividend income).
On the rebalancing: no problem at all as he held for more than 6 months. But IF they would classify him as pro, from that point any gain is taxable and rebalancing would cause an insane tax bill.
I believe for most people the following thumb rule might work
if you are worried that you will be classified as professional trader , then most likely you are not a professional trader
if you are a professional trader, you know already and you are not worried. Most likely you even applied for a status like that
And as we all know a huge majority of traders do not make money, there is a high likelyhood that over a reasonable period of time your (non professional trader type) trades will not result in much profit anyways. So there is nothing to tax
Always keep in mind that in most cases the classification as pro trader will come from an inquiry of the tax office that is not able to understand an increase of your taxable wealth from previous year. If your trading activity does not lead to a massive increase of your wealth then even if you buy and sell securities daily there’s no way you will ever be on their radar. I have declared margin loans in tax returns, I trade options, forex with yearly proceeds from sale that surely exceeds 95% of what people here trade and I was never asked any questions despite all my data being known by the tax office (IB sends this info to the tax man yearly). Again you will not risk anything as long this is a hobby and you do not make a living out of this activity (and I wish I could, then being a pro trader would be the least of my concerns lol).
You are not required to declare individual trades only the balances as per year end and any dividends you may have received. Yes IB only sends the sale proceeds but depending on the quantity of securities you sold this number can be high and I’m quite certain the tax man has an automated check to compare the quantity of securities you sold vs what you declared. However this value alone of course does not tell whether you actually made money on the sales you did.
Is this in ZH? I thought you need to declare each transaction and then it calculated your end balance. Also possible that you bought, got divs and then sold and declaring each transaction system would automatically would calculate divs.
If that helps you to calculate dividends you can add the various transactions but you don’t have to, what’s important is the year end balances and the total amount of dividend you got.
whats the best way to structure a legal form if one is classified as professional trader. Im thinking create a gmbh to pay corporate tax + AHV, if by doing this is it possible to ring fence professional trading activities using solely the gmbH and my normal personal long term investments and not pay capital gains on those?. Can that distinction still be made if one is classified as professional trader.
Most probably. The tax authorities are especially looking for people that trade for a living. One could argue that you earn your living with it as you hqve no income, but this would basically be the case for everyone who retires early. I highly doubt that they would classify you as a professional investor for this, you were just lucky with your bets.
It seems unlikely, like other say. I don’t know what share of your net worth this is, but this could be a once in a lifetime trade. Potentially missing out because you are afraid of unlikely taxes is not rational. You are not poor, go hire a professional or two for a consultation at least.
Here is the website of the Anwaltsverband Schwyz. There is a huge list with lawyers. Ask some with websites that seem trustworthy if they know someone who specializes and would do a consultation. Find peace of mind.
PS: This bugged forum software has had me reply to @ZahliBaba , sorry.
The question of being classified as professional trader is omnipresent in this forum, but 99% is pure paranoia and misunderstanding of the ruleset. The answer is nearly always that there is virtually no risk, even for the average active investor pursuing FIRE.
And yet the exception exists: You are at risk of being classified a professional trader.
Get yourself a good tax advisor, you can afford it. And stop communicating with your tax authority, that won’t help.
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