Taxation in Switzerland: Mustachian Know-How, Best Practices

Hey Zuri,
I think it does not make a difference in terms of Dividends if you are Quellensteuer or not. In both cases, Swiss dividends are taxed upfron with 35% Verrechnungssteuer which you get back up to the level of your income tax (=Quellensteuer rate) in case you let your Taxes be re-calculated after the year.

I think & heard (but not yet by a professional!) that you must list dividends as income. however, wealth is not asessed for Quellensteuer calculation afaik.

So you think I have to file taxes if I receive any dividends, no matter how negligible? One advantage of the Quellensteuer is that I don’t have to do anything with taxes…

this is a valid point. i do know that there is a threshold of CHF 200 for some things before the verrechnungsstauer is applied, but i know nothing for certain. If anybody does with a proper source - please post!

@not having to do anything with taxes: there is indeed not much hassle with taxes in case of quellensteuer. however, if you are enganged in 3a pillar, you should have the tax-recalculation for some reimbursement. also mind that (depending on your Quellensteuer tarif) you might get back 25% or one forth of your dividends if you declare them!

But don’t simply trust that random internet guy and later blame him for anything :smiley:

Thanks for the very informative post. Do you have any info on how joint investment accounts are taxed? I would like to invest with my partner, who earns less than me. Could we set up a joint account and add the dividend income to his tax base? Or does this in effect not matter as we are taxed as a married couple anyway?

good question!
But I dont know :confused: i did not look into taxes for couples. Sorry! but I will gladly add this information once we have it here!

Hi
For married people won’t matter since your income is lumped together.
If you are not married you can only transfer a fix amount of money without taxes to a non-relative person. Usually around 5000 chf but it’s cantonal law so it may vary.
If you want to give more money to your partner you have to write a loan document (even on a napkin) at whatever interest you want, usually 0% interest loan for your partner. Then you have to keep the credit amount on your wealth and declare eventual interest (if you don’t go the 0% route) as income on your taxes.
In exchange your partner must declare the same amount as debit and can even write off the interest from his income. If invest that money of course h must report the ETF shares he bought. So in the end is more or less a 0 gain game, particularly if you give a loan to your partner of 0%. Is just that this is a completely legal way of avoid taxation for money transfer to non relative, which would count as private donation.

This only applies to private investors. Unfortunately, it is not up to you to say whether you count as a private or professional trader.

According to moneyland.ch:


The tax authority applies these 5 criteria

The Swiss Federal Tax Administration FTA has set five criteria. If you want to make absolutely sure that you are exempt from paying taxes on your capital gains, you need to fulfill all of these five criteria together:

  1. You have been holding the securities for at least 6 months before selling them again.

  2. The volume of your transactions during one calendar year – that is the sum total of the purchase and sales prices of your securities during the tax period – is no more than five times higher than the total value of your assets and securities at the beginning of the tax period.

  3. You do not depend on the profits from trading your securities in order to finance your household expenses. Rule of thumb: the profits from trading should make up less than 50% of your total net income during one tax period.

  4. You are not borrowing money in order to buy securities. Or in other words: the taxable income you receive on the investment – like interest payments and dividends – exceeds debt interest payments.

  5. In case you are trading derivatives, particularly options, you may only use them to hedge your own securities.

It is worth noting that the tax authority can use a good deal of discretion when applying these five criteria. It can thus happen that you do not count as a professional trader – and therefore pay no income tax on your profits – even though you are falling under one or more of these criteria.


More detailed information in German can be found here: STEUERFREIER KAPITALGEWINN Schwierigkeit der Abgrenzung: steuerfreier Kapitalgewinn versus steuerbares Einkommen

Conclusion
If you reach FI and make a living selling your shares, you can be classified as professional trader and have to pay taxes on capital gains.

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Interesting, I have never seen these rules. I always thought it was the freedom of the tax administration.

If you reach FI and make a living selling your shares, you can be classified as professional trader and have to pay taxes on capital gains.
=> using the for 4% rule ~2.5% would come from dividends and 1.5% from selling shares. In this case, you wouldn’t be taxed.

BTW: it can be interesting to invest in growth stock which distribute less dividends

@ElMago That is a very good point. I guess the third criteria alone is enough for a mustachian to be taxes on capital gains. And you not only have to pay taxes, but also social cotisations :

“Wer allzu fleissig Aktien kauft und verkauft, kann von der Steuerbehörde als „gewerbsmässiger Wertschriftenhändler“ eingestuft werden. Gewinne werden dann als Einkommen aus selbstständiger Erwerbstätigkeit besteuert, und es werden Sozialversicherungsbeiträge für AHV, IV, EO und ALV fällig. Im Fokus stehen Anleger, die häufig hohe Volumina handeln, ihre Anlagegeschäfte mit erheblichen Fremdmitteln finanzieren oder in grossem Masse Derivate einsetzen. Waren die Behörden vor einigen Jahren noch übertrieben streng in diesem Bereich, so hat sich nun eine etwas kulantere Praxis durchgesetzt.”

Now I am wondering : In this case, how are capital gains taxed? Like regular income?

Now I am wondering : In this case, how are capital gains taxed? Like regular income?

“Gewinne werden dann als Einkommen aus selbstständiger Erwerbstätigkeit besteuert” - profits are considered self-employment income. In tax declaration for individuals, employment and self-employment income are added together and so, yes, it’ll get taxed under regular personal income tax rates. Plus you’ll pay a hefty 10.25% AHV on it - double of the normal rate because you’re your own employer for self-employment purposes. You could deduct realized capital losses from profits for up to several years back however AFAIK. All business expenses (i.e… trading fees) would be deductible too - but I guess you’ll lose the pauschal Vermoegensverwaltung deduction in exchange, so not such a good deal probably.

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My understanding of this matter is that if all 5 criteria are fulfilled, you can be absolutely certain that your capital gains will not be taxed.
If this is not the case, the tax authorities must examine each case individually to determine whether someone can be qualified as a professional trader or not.
However, as stated in the “circulaire 36” of the Federal tax administration: “Une gestion «dynamique» de la fortune privée doit demeurer possible. Le recours à des fonds étrangers constitue l’indice le plus pertinent d’un commerce professionnel de titres” (circulaire 36, page 3)
When passing the law in Parliament, Mr Villiger, Member of the Federal Council at the time, commented: “Nous ne voulons pas d’impôt sur les gains en capital pour les investisseurs et les épargnants traditionnels, ou quel que soit le nom que vous leur donnez, même s’ils administrent un bon portefeuille en appliquant les méthodes les plus modernes. Là, le fisc ne «se servira» pas, sinon il introduirait un impôt sur les gains en capital par la petite porte…” (Circulaire 36, page 3, footnote 4).

What I take away from all of this is that if you are investing your own money, it should be quite easy to claim that you are not to be qualified as a professional trader.

Then again, I have no experience whatsoever as to how the Tax authorities handle these cases…

Link to the circulaire 36
French: https://www.estv.admin.ch/dam/estv/fr/dokumente/bundessteuer/kreisschreiben/2004/1-036-D-2012.pdf.download.pdf/1-036-D-2012-f.pdf
German: https://www.estv.admin.ch/dam/estv/de/dokumente/bundessteuer/kreisschreiben/2004/1-036-D-2012.pdf.download.pdf/1-036-D-2012-d.pdf

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when I asked the taxation guys about this rules they answered me that the two most important criteria are: selling stuff that you purchased less than 6 months ago (active trading means for them buying and selling inside 6 months) and using leverage products.
People selling shares bought 20 years before usually do not count as professional investors, even if the capital gain are relevant and would amount to more than 50% of household income. But it would a case to case analysis.

But this was an opinion of a guy in one office so it is not law, is just how usually they look at these things.

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I think you missed the Church tax…

Criteria No.1 is for me absolutely insane… why should I hold on to a stock for 6 months when there is a good chance I will need to sell and re-invest before then depending on market performance?

I think I would rather Switzerland simply add my stocks/shares earnings to my income tax as part of the yearlz process than arbitrarily decide that I am a business and charge me CGT plus self-employment AHV contributions.

Very annoying.

I also think that this ambiguity is very unlucky. Howerver, I do not know a first hand account when a private investor was classified as professional.

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Hello,

I’m trying to figure how taxes on mutual funds work in Switzerland.

As far as I understand, on ictax.admin.ch they publish for every security the amount that is taxed as income at the income tax rate.
I just don’t know how to read the page. Take for example this security (a EUR-denominated mutual fund):
https://www.ictax.admin.ch/extern/it.html#/security/LU0792910134/20161231

If I kept 1 share of the fund throughout the year, the taxable amount would be 4.006 CHF. Is that correct?

Taking this other fund as an example, would the taxable amount be zero?
https://www.ictax.admin.ch/extern/it.html#/security/LU0256624742/20161231

Thanks!

Yes, you are correct.But you need to take the data for 2017 and not 2016
However, I don’t understand why the fund LU0256624742 displays no taxable amount, even if dividends are accumulated it should be counted

If anyone else is in Neuchatel, they have a handy calculator that just requires income and “fortune” - it will determine cantonal, commune and federal tax: http://www.ne.ch/autorites/DFS/SCCO/impot-pp/Pages/calculette_pp.aspx

I changed cantons this year (from Vaud to Geneva)

Am I right to assume that I only need to fill out one form to get my taxes back?

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