Question about Professional trader status

Hi guys,

I’m a bit worried about one thing regarding my crypto deals and would like to ask you guys.
Just like most of you I want to avoid getting the tax status “Professional trader”. Which would mean you have to pay more taxes for your gains.

I sold some ETH 2 months back. Half of it to EURO directly and half of it to the USDT stablecoin.(Don’t ask me why, I thought it was a good idea at the time)

Now, if I sell the USDT that I got only 2 months ago. Would I be considered a “Professional trader” since I did not own that USDT for at least 6 months before selling.?
Or do you think that this will not count since its a stablecoin? and since I’m stilll an amature investor who just DCA’s some money in from my income each month.

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Are your realized capital gains higher than what you earn? If not, the chance is very low that they’ll treat you as professional.

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Hehe no no…The gains are very small. Less than a 3rd of my monthly salary.
Then it sounds like I should be ok to sell the USDT.

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I am no tax advisor, but yes… Even with short holding periods… As long as the volume isn’t significant, you should be fine.

I am more interested in the behavior of this clause when retired early. It’s so fucked up that there is no standard easy explanation of how that works. Like why don’t they just exclude long term investments all together etc… There is a lot of uncertainty here which is imho not necessary. I don’t wont to be in the hands of incompetent and political tax office workers…

It’s not even clear if you can avoid capital gains by realizing some of them before retirement, because due to the authorities that would be tax evasion… what a joke the swiss tax law is. For billionaires, there is Pauschalbesteuerung and for us there is a lot of uncertainties and begging to not be taxed.

Is there really no one in this forum who reached FI and can thus clarify, how this behaves in practice?

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Jumping in on the bandwagon. I have a question about cryptos in general.
If you are just buy & holding cryptos, you have to declare your crypto assets as of 31.12. of the tax year.

So let’s take the following situation. You buy shitcoinnumberone (SCNO for simplicity) for 1 cent today, miracously it does a 1000x in the next months, and it’s worth 10$ on 31.12.2022. As far as I understand it - you only have to declare it as part of your net wealth. Because I would hold it longer than 6 months, it should be safe in terms of professional trader status. Do I get this correct?

Unless I sold some parts before 6 months are over, and made something like 1.5 times my annual salary. Then I might get some questions from the tax office.

Depends on the canton - you need to declare transactions in AG so you’d declare your currency. There is a flag with “Steuerwert 0” (tax value 0) which you can check and that basically declares that you sold before the end of the tax year.

I wish we could somewhere put a sticky post saying that nobody ever has been deemed a professional trader in this forum ever, and it’s therefore unlikely that anybody asking for it will be a professional trader in terms of taxes.

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Yeah, but what if you sell 100K a year in early retirenment without additional income?

from other peoples experience here its really difficult to get “professional trader” status.
Like you could show them that this was your “normal routine” even when you worked.
I would not put to much tought into this status.

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It’s just really drilling that we don’t have clear laws and rely on the mercy of tax office employees. Why not say something like: “Capital gains under 100K are free no matter what”

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Is that so? Man, that brings me some comfort. So I guess you and others has bought and sold stocks/Cryptos within a 6 month period and now being deemed a professional trader then?

Bought and sold a lot, not deemed as professional. If the gains are not over 50% of your taxable income don’t even think about it.

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I will keep that in mind. Because my gains are like 5% of my taxable income.

I would not quote this sentence as the rule. It really depends on the canton. I once talked to a guy who used to live in canton Schwyz and was classified a professional trader, even though his gains were in the 20k range only. That being said - I don’t know if he used algorithmic trading and how many trades he made during one year. Unfortunately, I only met him once during a meetup. He definitely wasn’t happy that they classified him as a professional trader, because most of his other holdings were passive ETFs.

Just take the story above as a warning. I also talked to my (company) tax advisor, who has studied tax law (dipl. Steuerexperte). He also told me to be cautious when it comes to Kreisschreiben Nr. 36. But it might be different in every canton - I guess in canton Zurich they won’t classify you as a professional trader.

You only pay profits on realized capital gains, so as long as he didn’t sell a lot of his ETFs in the same tax year, he should be fine.

A lot of people think you get taxed on “Buchgewinn” but I don’t know any country that does this. Also the chance is high that he was classified against the law, but didn’t bother to go to court. I don’t think that 20K is enough to count as professional under any circumstances.

That’s true. Most probably he also sold some ETFs and had to pay taxes on the realized profits.

We’re talking about Switzerland here. Would you go to court for 20K? Chances are high you’ll pay the same amount or more for the lawyer.

A very simple and effective method to prevent normals from beeng classified as professionals in early retirement would a “Spekulationsfrist” or mandatory holding period after which all capital gains are free, no matter what % of your income they are. (5+ years f. e.)

20K (or even less) could categorize you as a professional trader if other criteria are also met. The laws are very vague and leave a lot up to tax offices to decide on a case-by-case basis.

If you realize a 20K capital gain on a trade, but otherwise hardly trade at all, then you should not be categorized as a professional trader. There was a case of a person in the canton of Zurich who realized a gain in excess of 1 million francs, but successfully countered the tax office categorizing him as a pro trader because he made very few trades and only invested his own capital.

On the other hand, if you invest using borrowed money and/or invest other people’s money, you can be classified as a pro trader even with very low (or no) capital gains.

Thank you for your input.

That just underlines the point that there is a lot of “Wildwuchs”. I don’t want to rely on the mercy of the tax authorities in order to not get taxed. I don’t know what benefit such intransparent and vague laws bring to the normal citizen without a lot of money for a tax advisor… But I guess I’ll get one once I reach FI in order to prevent such BS.

I also don’t like the vague law in this area. However, I don’t have any concerns at all for regular buy-and-hold, even after potential FIRE. In the accumulation phase, passive investing normally fulfills all 5 criteria of the ‘Vorprüfung’ in Kreisschreiben Nr. 36, in which case there is no risk at all.

After FIRE you might not fulfill criterion 3 of the ‘Vorprüfung’ (realized capital gains less than 50% of net income). However, the three primary criteria (4.3.2 Besonderheiten für Wertschriftenportefeuilles) should not be an issue for buy-and-hold even after FIRE. So purely for buy-and-hold (without significant leverage), I’m not worried.

It could be a real concern for people who want to speculate or use derivatives with a small part of their money while passively investing the biggest part. This doesn’t affect me personally but that’s an area that should really be improved.