Hi,
I have a 5 year note, paying a healthy sum per month, as a resident in Switzerland, do I need to pay tax on my monthly payments which I receive ?
Thanks
What is the country of the issuer of your bond?
Short answer: yes, you’ll need to pay tax on the interests, though what you have already paid and what you can get reimbursed varies depending on what country the bond has been emitted in.
It’s a private bond in the US.
If it were in Switzerland, how would it differ ?
In Switzerland, you’d be subject to the swiss witholding tax of 35%, which would then be deducted from your regular taxes after you’ve declared it to the tax authorities.
The interests delivered by a US bond are subject to the US witholding tax of 30%, which is reduced to 15% if you file a W8-BEN form, due to the tax treatie between Switzerland and the US, provided you fulfill a small set of criteria, of which I am not sure of what they are if you have purchased this bond directly instead of through a broker. Those 15% can further be deducted from your ordinary swiss taxes by filing a DA-1 form with the swiss tax authorities, provided you pay at least 15% (marginal? I’m no expert, others can weigh in) income tax.
For more info, I’d direct you to this very well crafted @nugget’s post, for ETFs but mainly also applicable to individual securities: Tax optimisation for ETF investing
Actually there seems to be no withholding taxes on interest distributed by US entities 
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Good point, although I think there is then 30% Swiss additional withholding tax if this is a Swiss broker.
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Hi all,
I have an IBKR account and I was going through the Mustachian blogposts about the tax declaration for dividends. I noticed this post where it mentions that the withholding tax is “notably on interest and dividends”. The dividends are clearly explained and IBKR shows you in the report the amount witholded for taxes. What about the interest on the cash? IBKR by default have something between 4 and 5%. In the yearly report, I do see the interest for my account but there is no mention of witholded taxes. Does it mean IBKR does not whithold anything for interest? What I normally do is that I fill them in my tax declaration for my IBKR account, check the “not subject to withholding tax” and they will be considered as revenue and I will receive no reimbursement of tax (since IBKR did not withold anything, at least that is what I thought). Is it correct? Or does IBKR apply tax witholding on interests ? If yes, where can we see it?
As you say, there is no withholding on cash balance interests.
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I cannot open your link, but the French version says « exoneration » which I think is « not applicable » https://www.estv.admin.ch/dam/estv/fr/dokumente/international/laender/int-laender-usa-fr.pdf.download.pdf/int-laender-usa-fr.pdf
Just to confirm, those cash balance interests are still considered as revenu even so there is no tax withholding, correct?
Withholding tax is not final tax. It’s more like a pre-tax that is sometimes deducted by countries to avoid tax evasion. Interest income in IBKR doesn’t have any withholding tax as far as I know.
The final tax would be calculated when you declare this interest income in your tax return. CH tax laws require disclosure of all income.
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Absolutely correct.
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