Synthetic and swap-based ETFs

This analogy makes no sense. in my analogy you are a shareholder and that’s why you’re getting paid. in your analogy you’re getting paid for doing a job.

1 Like

I assume you count buyback same as dividend in your reasoning? (since it also redistributes earnings to shareholders).

It doesn’t make a difference. You can easily be both at the same time.

Income is funds that you receive free to your disposal, to spend as you please (though of course in practice the definition of taxable income will have been modified to some degree). And that’s the basis on which it is taxed.

It doesn’t - though there might be an indirect effect through market price effects.
Conversely, I am not investing when a company makes a share issue, am I? (Though I could by exercising my rights).

I thought it was a widely acknowledged view on buyback.

Eg Wikipedia

Share repurchase (or share buyback or stock buyback ) is the re-acquisition by a company of its own shares. It represents a more flexible way (relative to dividends) of returning money to shareholders.

1 Like

You are free to sell at market prices to anyone at any time.
There is no distribution or direct transfer of money to you, when a company buys shares at market prices.

It “only” helps to potentially prop up the stock price.
Also, with regard to taxation, capital gains are taxed in many (most?) developed countries.

Share repurchase - Wikipedia any idea why wikipedia would present it as a (more flexible) distribution to shareholders (and that’s also how I’ve always seen it mentioned in press, e.g. Matt Levine’s Money Stuff).

The wiki page has a nice table, there’s quite a few country who have lower taxation rates for capital gains (and surprisingly some countries are reversed).

I recently came across this new ishare’s ETF (I500 / IE00BMTX1Y45 / iShares S&P 500 Swap UCITS ETF) and got intrigued.

It’s synthetic ETF (and apparently the first such one for ishares) with fairly low TER (0.07%), negative tracking error (vs. net index, as is typical for synthetics using swaps to avoid dividend taxes), and among key selling points some publications note that it will hold a “substitute basket restricted to non-dividend paying stocks” thus avoiding associated taxes.

Most synthetic ETFs in CH are penalized with fictional income taxes - I presume due to such swap basket typically containing divs or something, these taxes make them comparable to conventional wisdom approach of going with US-domiciled physical ETFs, but with extra risks of synthetic constructions. And so if this new ETF promises tax-free divs, is this the holy grail of tax-efficient investing into US market or what? Am I missing anything? In ICTAX for last year it’s already listed with the income of $0 FWIW.

Anyone ventured into the area of synthetic etfs and has any insights about it?


S&P500 as underlying index.
Is going to be taxed as income - just as any other Swapper.

I don’t know which if any third-party publications make this claim. Going straight to the horse’s mouth though, iShares themselves lists a ton of dividend payers among their physical holdings.


For example

Yes, but they change often enough if you check holdings as of a few different dates. A few names are dividend paying, yes, e.g. PEP in current top 10 - but they didn’t hold at its previous ex dividend date, Dec 3, and I suppose they’ll get rid of it before next ex/d/d

It has no taxable income in ICTax because the fund was launched on the 24th september 2020. There WILL be a taxable income in 2021.


Have a look at this post regarding taxation of swap etfs

I think there used to be times when this was possible: Receiving no actual dividends but tracking an index synthetically. But tax authorities in many countries caught up to this (also swap income could potentially be taxed).

What about that post? Nothing relevant to me as far as i can see

It has existed for more than a whole quarter in 2020, accumulating some of the dividends from that quarter

Yes but those tend to have only a single date in ictax. Also sometimes it takes time for them to compute it, so would appear later.

„Bei kollektiven Kapitalanlagen, welche ihr Exposure synthetisch replizieren, ist zwingend ein gesondertes Steuerreporting für Schweizer Einkommenssteuerzwecke zu erstellen, aus welchem die Rendite des(r) Basiswerte(s) hervorgeht. Massgebend für die Ermittlung des steuerbaren Ertrages von Swap-based ETFs, welchen Aktienindizes zugrunde liegen, ist die Nettodividenden-Rendite (net dividend yield). Darunter ist die Bruttodividenden-Rendite der entsprechenden Indizes, abzüglich der anwendbaren Quellensteuern zu verstehen. Die Nettodividenden-Rendite für alle wichtigen Aktienindizes wird von den anerkannten Providern publiziert und kann für das Steuerreporting verwendet werden.“

Kreisschreiben 24 ESTV


The table appears to be bogus. They list 21.1% “top marginal tax rate” for Switzerland, which is clearly wrong. They either confused it with average tax rate, or they only accounted for federal taxes.

1 Like

Most likely the latter, it’s pretty hard to have accurate international comparison for those things.

(anyway the point was that not having capital gain tax wasn’t super rare either)

1 Like

The source is here:

I haven’t wrapped around my head around that yet.

It’s a substitute to a distribution to share holders - stimulating the price by lowering availability (number of outstanding shares). Since nothing gets actually distributed to shareholders - but acquired at market price - it’s not taxable.

Continuing with the theme of tax-efficient distributions and different tax rates on dividends vs. capital gains, there is particular potential for tax savings with accumulating ETFs (albeit not in Switzerland):

For most EU Long Term Investors, having an accumulating ETF is preferable since taxes on dividends are deferred until retirement

You don’t seem to pay (income) taxes on accumulating ETFs before you sell them, in most countries in Europe. So if the country doesn’t have (or charge you) an exit tax, you could possibly spend years there while accruing wealth in your fund investments tax-free - before moving away and sell them, again tax-free, in a country that doesn’t tax (personal) capital gains.

There are, of course, also a number of (non-European) countries that don’t have any taxes - question is you can move there and if it’s worth the living expenses - or if you like it at all.


Someone in this forum said that with this ETF:

You should have 0% witholding due to the fact that it is a synthetic/swap-based ETF.