The way I understand it ALL of your portfolio is counted, meaning that all capital gains are then taxed. So you are infecting your “private” portfolio. Which is rather unpleasant, because you don’t want to pay capital gain taxes on the long term stocks which you are not planning to sell. Note: I’m still not sure if my understanding is correct.
Yes, that could be classified as a violation of the employment contract. I don’t think the authorities will be notifying the employer though. This is an assumption though.
I guess it really comes down to the percentage of income you are generating with the option writing, plus the canton you live in. You might be classified as a professional trader in canton Schwyz for just writing options which generate 1k per year, while you are not classified in Zurich for writing options which generate 25k per year (while earning 100k).
I read a little bit more on the topic, and found the following article from NZZ in 2019: here (in German)
It mentions that canton Zürich only classified 100 private people in the previous 5 years (before 2019) as a professional trader. One reason for this: once you have professional trader status, you can also deduct losses from the profits.
Hi i am new to investment and I just came up with a question about 2 criteria (Capital gains of private investors do not account for more than 50 percent of their net income). So for example if my net salary is 50k/year I invest 100k in stocks for 1 year, i gain let’s say 30% so 30k which is already >half of my net income, i instantly classify as a professional investor? Does it apply only if I want to sell my stocks and take out cash or if i keep my stocks? And what if i am married, my joined net income is let’s say 100k/year, then i could invest 2x more without being classified as professional and pay capital gain tax?
The criterion of staying below 50% of your net income only refers to realized capital gains. As long as you’re just accumulating/holding (without leverage) there should be no risk of being classified as professional trader, as I understand it.
Das ist regelmässig dann der Fall, wenn die realisierten Kapitalgewinne weniger als 50% des Reineinkommens in der Steuerperiode betragen.
Ordentlicher Anknüpfungspunkt für die Beurteilung der Frage, ob die steuerpflichtige Person eine auf Erwerb gerichtete Tätigkeit ausübt, ist das Vorliegen einer oder mehrerer Veräusserungen. Erst in diesem Zeitpunkt sind alle Umstände bekannt, die für die Beurteilung massgeblich sind.
Nobody will be instantly classified as a professional investor. The oft-cited criteria set by the federal tax administration are designed to (when fulfilled cumulatively) preliminarily rule out professional investing/trading.
The fact that something can not instantly be ruled out from though does not mean that the opposite must then be “true” or applicable - let alone that it could be so determined instantly.
You will almost certainly be able to do even that without being considered a professional investor. The laws, regulations and adjudication are not meant to penalise you for being a frugal and successful investor and making a trade or “cashing out” your returns every once in a while.
If, on the other hand, you sustainedly engage in systematic and/or leveraged trading and use that to make a living and/or substitute work income, chances are you will be deemed a professional investor.
Put differently, you can think of it like this: Capital gains from personal investments are free.
You should just not overdo it or flagrantly abuse that principle (or else you will be paying taxes).
Some tax authorities will be stricter and other more lenient. But as a rule of thumb - and not only for securities trading - tax authorities will be concerned with your activities (only) once become a job to you (though it doesn’t have to be your primary job, and yes, there are often grey areas between having a job or professional activity and merely helping the neighbours or pursuing a hobby).
Thanks for the answer! So to be completely clear if I want to save systemically all the time, always put money aside and invest not selling more often then 6month and at some point like in 5 years let’s say my stocks are worth 250k. Then i decide to realise them to buy a house. But my salary at that time will not be 500k so will i pay taxes on capital gains? And furthermore once i am considered as professional trader will it apply all my life? Can i somehow prove I want to become private investor again?
You won’t be classified as a professional trader for this. Please note that selling every 6 months is not the best idea, because you are missing out on compound interest. Investing in stock market is playing the long game (10+ years).
If your stocks are worth 250k in 5 years (and let’s assume the capital gain was 100k), it’s no problem to sell them all at once, because you held them longer than 6 months
You mean the capital gains of the trading, or also capital gains for his ETFs? Also, did he have to pay and social security stuff like AHV on top?
Do you know which canton the guy lives in?
I met someone who was also assigned the status in canton Schwyz three years ago. He was “just” trading options. No algorithms, no bot. I don’t know about the number of transactions, but from what he told me it was not crazy.
I’m not aware if he has/had ETFs or not or if he sold any during that year. To my knowledge it was only shares and options. I would assume all capital gains for that tax year were taxed the same. He was in Basel (not sure of BS or BL). He didn’t mention anything about AHV.
SZ is one of the tougher ones to my understanding. They may have favorable taxation for withdrawing your 2nd or 3rd pillar but are really strict when it comes to more active investing/trading or derivatives. If one were to really follow the letter of the law and challenge the SZ Steueramt, better make the options positions look like they are an insurance for an existing asset like some shares (this is a legit scenario which is explicitly mentioned by many cantons and from memory also at the Bund level).
Thanks for the update @LeStache. Much appreciated.
To my knowledge, that’s only possible by buying PUT options (which doesn’t earn you money). Selling PUTs to earn a side income is definitely not an insurance.
That’s still a tricky thing though. The tax office in BS will not care if AHV was paid or not, but if Ausgleichskasse gets the info about professional trader status, they might ask some questions.
I recently switched to Interactive Brokers (from Degiro). I currently only own VWRL and intend to hold it until I reach FI. After MPs latest Post on margin trading I got interested in the topic. I’m not particularly afraid of being classified as a professional investor (although margin trading seems to violate at least one indicator), but I’m more worried what this means for my tax declaration. Especially, since I’m a B-permit holder.
What is the tax treatment of these in Switzerland, is the income counted as if it was a capital gain or a dividend gain? Would the tax office consider writing puts as professional trading (this is mainly a risk parity thing for me).
Please don’t think we are fools. Selling cash covered OTM puts is NOT an insurance, but a way to earn money on the side.
Just check Kreisschreiben 36 from ESTV, or use the search function here in this forum.
You might get away with selling some put options, but it also depends in which canton you live. Personally, I met someone who was classified as a professional trader in canton Schwyz. Also my tax advisor had clients who were classified. In canton Zürich, it’s rather unlikely.
Thanks for this, as long as the tax office thinks the options buying/selling is for hedging then it is not considered professional trading.
Please don’t think we are fools. Selling cash covered OTM puts is NOT an insurance, but a way to earn money on the side.
I want to keep a static allocation of 60% stocks, 40% cash (since bonds are negative), one way to achieve this is to sell puts (and earn something on the side), rather than buy stocks by myself when stocks drop sufficiently.
Personally I do not see how this is professional trading or an advanced strategy that would require a person to be an expert and carefully trade the derivatives according to some plan.
I sold puts on SPY a handful of times but stopped it because I am near FI and size of my portfolio is large relative to my salary. I did not want to put at risk one of the advantages of being resident in Switzerland which is no capital gains tax.
In the end, she/he shouldn‘t care about about - but the tax office.
If anything is professional trading, it‘s selling puts. Even the risk parity remark kind of indicates it. And I can’t see any tax office considering it as „portfolio insurance“. Well, unless the rest of your portfolio is structured „professional-trading like“, I guess.
I‘m not saying one can‘t get away with some professional trading „on the side“ without being taxed as such. But since Rainmaker didn‘t indicate volume, relative size to his portfolio holdings/transaction volume and domicile, it‘s hard to make a guess.
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