Yes, the “play” would be easily identifiable (since you need to provide all your transactions during the year), and taxed accordingly, or even likely with some penalties for attempting to evade taxes.
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In principle if you didn’t know why you were making these transactions , this is exactly what would happen and you would be benefited.
The underlying dividend is never paid , so the value of ETF is always growing. Tax office has defined only one day to make it easier for them to tax investors as they simply match the dividend date to year end of the ETF. However the real income is generated throughout the year as underlying companies pay dividend.
Just to keep in mind, the responsibility of paying taxes on income is on investor. Ictax is just making it easier for you to calculate income. In reality, if ICtax didn’t exist, you were supposed to calculate the dividends yourself and report them. In that case you would have had to find out how much dividend was collected by the fund using quarterly reports.
In summary, even though what you are suggesting is technically not illegal, tax office might not appreciate this. This could be seen as abusing the established practice with pure purpose of not paying taxes. And they might simply ask you to declare income from these ETFs separately which these funds generated during your holding period. Calculation would be on you.
Last point -: just because you sold ETF before accounting year end , doesn’t mean your assets didn’t receive dividend income as explained above . So technically speaking you would end up under-reporting your income.
My suggestion -: If you don’t like paying dividend taxes, just buy ETFs which don’t invest in dividend paying companies.
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Mmh, I don’t think that’s the function of ICtax (calculating dividends collected by funds from the underlying stocks).
ICtax exactly mirrors the dividend payments by the ETF to the investor (not any underlying payments from holdings to the ETF). Usually 4 payments p.a. for the common US ETFs. If you didn’t want to use the “automatic” ICtax database, you could manually enter the dividend payments received per payment dates based on the transaction reports of your broker account, but one wouldn’t need to scour any fund reports for dividends the fund collected (thousands of payments for VT etc.)
The BOXX distribution was a distribution of gains so is not income and shouldn’t be taxable.
No they can’t. The nature of a transaction is a matter of fact.
If they want to tax it, the law needs to be changed.
For accumulating ETFs, they (ictax) calculate the dividend income based on annual reports. There is no payment to investor , that’s why they simply put all dividend income on one date which is financial account year end of fund. Of course they know that’s not exactly accurate but it’s easier that way.
The ETFs that were mentioned in the post above are accumulating ETFs
I myself had to provide an annual report of a fund I bought because they don’t actively track it.
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Agree. This is nothing different than active funds who also buy and sell. But @Tony1337 pointed put some legislation changes below
It was like 50/50 longterm and shortterm capital gains. So ictax might classify the short term gains as taxable. They have done so at times with other funds.
And there is current legislation that allows that iIrc. It changed a few years ago iIrc.
You can check several managed futures funds where the short term cap gains distributions were classified as taxable.
Such as CTA/DBMF
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Ah, my bad, I missed that those were accumulating funds!
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I just can’t find any reference to the actual legislation on the Swiss side. Any chance that this is either:
- new regulations in the US, but incompatible with the tax treaty, thus wrongly applied by IBKR. The treaty itself is rather clear on what can be taxed in the other (non-residence) state. It’s a whitelist, all Other Income can’t be taxed. And yes, gains (as in capital gains) is in the treaty (Article 13).
- ICTax making wrong assumptions, and nobody protests? The opposite case seemed to have happend with the totally tax free gains of KMLM.
This might be a big reason.
For example for commodities cayman subsidiaries are also used, and those gains count as income in the US. But that should not be at all relevant for us.
I also can’t find the legislation right now. I just remember researching that a few months ago, and read something on short-term cap gains in Switzerland and the ability to be taxed on them.
E: What I found on short notice
If something is not transparently viewable for ictax, it‘s generally taxed as income. So if a fund does not fully classify a distribution, it will be taxed.
Now also, if the fund is an US fund and classifies it as income distribution, we may run into problems.
I guess here it can became crucial to complain to ictax and proof to them that it‘s not actually income. This is what may have happened with KMLM.
Ah yes, the ole Besteuerung von Obligationen, Derivaten und kombinierten Produkten. I fondly remember digging through it to classify BOXX ETF.
I agree, but at least for the standard capital gains, short-term or otherwise, there shouldn’t be any problems.
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Then we would for sure need to complain if it‘s taxed. It happened a lot with many managed futures funds I checked and cross-referencing the distribution classification they gave.
Dear all, are dividends paid by ETF and index funds treated in the same way from a tax perspective? I’m investing in a UBS index fund tracking MSCI world (ISIN: CH0356507415) and was wondering if I get the 35% withholding tax refunded. Thanks!!
There are two different taxes if I try to explain in simple way
Tax 1 -: which would be reduced from the dividend and you would not even see it. It would be different for every country UBS Fund is investing in.
Tax 2 -: which would be reduced from the dividend that you see and it would be 35% in your case
Let’s say the actual dividend is 100 USD , the fund might receive 70 USD after tax 1.
you will receive 65% of 70 USD which is 45.5 USD (24.5 USD is tax2)
100 → 70 → 45.5
Tax 2 can be refunded via tax credit during the time of filing tax return.
Tax 1 is lost forever for Swiss domiciled ETFs
Side note -: when we look at world ETFs, Tax 1 is low for US domiciled ETFs, next best is IE domiciled ETFs and then comes CH domiciled ETFs .
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Thanks!
So if I understand correctly, tax 1 for CH domiciled fund is 30%, tax 2 is 35%. Tax 2 is reimbursed via tax declaration. And this is in line with what is written on the MP website 
However I see a difference between my experience and what I read on the MP website for the US domiciled ETF. I own VT ETF and when I receive dividends they are always taxed at 30% and not at 15% as I would have expected. Do you know why?
I’m asking because unfortunately I must use UBS as custodian and I’m charged whenever I hold non-UBS products. Thanks!
There is 30% withholding for swiss brokers (that you get back with DA-1 + R-US)
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On the tax form it is called “zusätzlicher Steuerrückbehalt USA”.
| ETF domicile | Broker | Beantragte. Quellensteuer | Rückbehalt USA | Total | Tax credit possible? | DA-1 form needed |
|---|---|---|---|---|---|---|
| CHXXXX | SQ | 35% | 35% | YES | No | |
| IEXXXX | SQ | 0% | 0% | N-A | No | |
| USXXXX | SQ | 15% | 15% | 30% | YES | Yes |
| CHXXXX | IB | 35% | 35% | YES | No | |
| IEXXXX | IB | 0% | 0% | N-A | No | |
| USXXXX | IB | 15% | 0% | 15% | YES | Yes |
This is my understanding. I am not 100% sure for IE ETFs but someone here might be able to confirm
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The amount that I see there amounts EXACTLY to 15% of the total dividends received from VT ETF in 2023. Maybe the other 15% must be claimed back using something else than the tax report (steuerauszug). What do you think?