Tax optimisation for ETF investing [2024]

[covfefe]

Just to add that MSCI world value weighted has dividend yield 1% higher than MSCI world. 2.86% vs 1.77%. There finpension does offer the CSIF MSCI world value weighted ex CH pension fund in 3a. The TER is 0.12% or so.

It may be interesting to hold in 3a. MSCI Index PDF

~ 65% in US and Japan

[assemblyrequired]

@assemblyrequired

OK so for the slow and stupid like me, do I understand that right:

• Let’s say I have shares of VT that paid out CHF 1’000 in dividends in 2023, of which Uncle Sam kept 15%, so I actually recieved CHF 850. In my tax returns however, the full 1’000 are declared and added to my income, which then amounts to, let’s say 100k net.
• My tax rate for this 100k net for 2023 for, let’s use ZH, is: 6.296%
• I take the basis of taxation of my municipality (without church taxes), example Zurich: 218%
• I multiply those: 6.296% × 218% = 13.72528%
• Then I take my federal tax rate (again, net income of 100k): 2.802%
• I add those together: 13.72528% + 2.802% = 16.52728%

I then fill out DA-1, which is basically me saying: hey I paid Swiss taxes on these 1’000.– dividends, but the US has already taxed that, give me back the part that was double-taxed.

• In the above case, US and CH both taxed 15%, and additionally, the Swiss taxed 1.52728% on top of that. I get back what both had taxed: 15% (which is the full 15% withholding tax)
• If the tax rate calculations from above would have resulted in, say, 10%, US and CH both would have taxed 10%, and additionally, the US taxed 5% on top of that. I get back what both would have taxed: 10%.

Is that correct? And in which equation above would I now have to include deductions for wealth management (e.g. 0.3% in ZH)?

Anyone care to confirm these calculations are correct?

[Brndete]

@assemblyrequired

in which equation above would I now have to include deductions for wealth management

You’re missing the consideration of deductions.

If your VT dividend is your only investment income, no debts, 300 wealth management fees deducted, you get

• 1000 DA-1 income - 300 deductions = 700 max amount
• 700 * 16.5% = 115.5 max reclaim

Just to add, you still fill out 1000 income, 150 reclaim.
You’ll get a letter a few weeks or months later with that calculation to confirm / correct your reclaim.

[assemblyrequired]

Great, thank you.

What if I had, say CHF 500, additional dividend income without WHT (like an Irish ETF)?

[Brndete]

The deductions are allocated accordingly to the DA-1 part: 300 * 1000/1500 = 200.
1000 - 200 = 800 * 16.5% = 132 max reclaim

[Abs_max]

I always thought the proportions are based on tax value of assets . But it seems you are saying the proportion is based on income from those assets?

Just to be clear , let’s use following example

DA-1 assets -: 50,000 , income 1000 CHF
UCITS ETFs -: 50,000 , income 500 CHF

Management fees = 0.3% of 100,000 = 300 CHF
Management fees related to DA1 would be 150 CHF

Shouldn’t max claim be
1000 - 150 = 850 * 16.5% = 140.25 CHF?

[assemblyrequired]

I guess it’s because it doesn’t matter if you got CHF 1 dividend from an investment of CHF 10 or 10’000, as you don’t pay income tax on invested assets, but on dividends.

[Brndete]

Loans incl. mortgage are based on the interest deducted in portion of asset value. The wealth management fees he mentioned are based on investment income.
Eventually, both deductions are combined.

[assemblyrequired]

Again, thanks so much. Now I have to fire up my investment spreadsheets and redo my “are US ETFs worth it” calculations.

[jay]

@Abs_max

I always thought the proportions are based on tax value of assets .

Yes, the ratio of the tax value of DA-1 assets to the total taxable assets is what’s used to distribute deductions (Steuerwert DBA-Titel : Wert Total Aktiven).

@Abs_max

Shouldn’t max claim be
1000 - 150 = 850 * 16.5% = 140.25 CHF?

Seems correct to me, assuming 16.5% is the tax rate and there are no other taxable assets.

Tax refund via DA-1 denied

Do you two have significant wealth-related income deductions such as mortgage interest or margin loan interest? Or is this really about insufficient evidence? The formula according to Kt. ZH is Ertragsminderung = A x B : C A: Schuldzinsen und Unkosten B: Steuerwert DBA-Titel C: Wert Total Aktiven And then Maximalbetrag = (Bruttoertrag - Ertragsminderung) x Anrechnungstarif “Anrechnungstarif” is your average (not marginal) income tax rate. In Kt. ZH they send you a “Berechnungsblatt P…

[Abs_max]

@jay

Seems correct to me, assuming 16.5% is the tax rate and there are no other taxable assets.

The 16.5% was just example from the comment above. Thanks for clarifying the calculation

[Brndete]

@jay

ratio of the tax value of DA-1 assets to the total taxable assets is what’s used to distribute deductions

Correct for deducted interests, not correct for asset management costs that were used in the example above.

[jay]

@Brndete

Correct for deducted interests, not correct for asset management costs that were used in the example above

At least for the tax year 2019 in ZH, both types of deductions were handled the same way as “Schuldzinsen u. Unkosten”. It’s possible something changed since then or not all cantons do it the same way, though.

[Brndete]

Right, it used to be. Just checked my old documents.
2019 was a long time ago

It was changed (or rather specified) with the law on tax reform and AHV financing (STAF; 18.031) in 2019, effective since 2020.

[covfefe]

Same as my experience from tax declarations in ZH from 2020-2023.

[Zardack]

Good morning,
probably stupid question, excuse my ignorance.
Let’s say I receive 850 CHF of dividend from VT (1000 CHF gross - 15% L2TW) and that I have a marginal tax rate of 20%, to calculate the actual taxation on the dividend this calculation is correct:

1000 CHF are declared and taxed at 20% (marginal tax rate) = 1000*0.2= 200 CHF
The following year (if I fill out the DA-1 form) they deduct 15% of the L2TW from my total taxes so I get back 150 CHF.
Total lost in taxes = 200-150 = 50 CHF

Net dividend yield:
850 CHF received - 50 CHF taxes = 800 CHF

Total taxes on net dividend received = 50/850*100= 5.88%

So in my spreadsheet to consider the net dividend yield I enter -5.88% on net received.

While reasoning on the gross dividend the total taxes correspond to your marginal tax rate = 1000 CHF * 0.2 = 200 CHF, because the 15% of L2TW is recovered.

Did I interpret everything correctly or did I miss something?

[nabalzbhf]

@Zardack

Did I interpret everything correctly or did I miss something?

That looks right, but that’s a fairly odd way to look it it Normally the denominator is always the gross dividend.

[Zardack]

Thanks, my goal was to make sure that the only taxes paid on the dividend are actually those related to the marginal rate and no others.

[SwissTrader]

From the pespective of a Swiss investor, which is the best funds domicile for a fund holding European stocks, Switzerland, Ireland, US or doesn’t it really matter which one?

[Abs_max]

Here is some info

https://finpension.ch/en/knowledge/best-fund-domicile/