Hey Guys, this year I started investing into ETFs - first iShares World and Barcley Global Agg Bonds using CT (@ SIX), and now I’ll start investing in VT/VTI using IB (@ American exchanges). How do I declare and pay taxes on that? Is it different in each canton? I’m currently living in Zug, though I might move next year to Zurich or Luzern. Do you know how should I handle that? Maybe the best idea is to just go to Kantonale Verwaltung Steuerverwaltung and ask them how to pay taxes on my investments?
Depends on how you’re taxed.
Normally, as a swiss or C permit holder or married to one, they’ll send you a few bills with suggested prepayment during the year, ignorable in most cantons, then after the end of the year the tax declaration forms to list your assets and income. You file, they hold onto them for a few years, then send you the final bills or give you refunds for taxes you prepaid earlier, with interest.
On L or B permit you’d be usually taxed at source only and don’t have to fill anything, tax at source and withholding taxes are the only thing you have to care about, except in two main cases:
- nachträgliche ordentliche Veranlagung: If you earn over 120k gross, you’ll have to file tax return and go through normal taxation later, tax-at-source will be treated as a prepayment of final taxes, you’ll get a bill or a refund for the difference to final taxes eventually.
- ergänzende Veranlagung zur Quellensteuer: if you have more than a certain amount of wealth or income above your taxed-at-source salary, (thresholds in ZH are 200k and 2.5k per year), you’re supposed to contact the tax office proactively about it, and they’ll send you the form. They’ll calculate you some taxes to pay on the extra income which will be on top of tax-at-source. They won’t treat tax-at-source as a prepayment for final taxes unlike for normal taxation and won’t refund it.
Note that tax at source rates are same within each canton, but normal taxation rates vary by commune. So the switch from one taxation to another can come either as a pleasant or a nasty surprise
Hi @hedgehog! As always, you’re right. As a Permit B holder, taxed at source and earning less than 120k gross, I don’t have to do much with tax declaration.
I actually went today to Kantonale Verwaltung Steuerverwaltung and asked them about tax exemptions from 3rd pillar investments and about the taxes on my ETFs investments. In regards of 3rd pillar exemptions, I had to only bring them Lohnausweis and a document that I received in January from UBS (last year I had my 3a there, this year I moved to LUKB).
In terms of investments, they asked me to fill “Steuererklärung - Formular WV - Wertschriftenverzeichnis ” (you can find it here). I haven’t invested last year, so I don’t have anything to declare, but next year I’ll have to do that. I wonder what are the thresholds in Zug for that. Even if I’ll match these thresholds, they will probably not tax my investments too much. We will see next year.
Being taxed at source in Zug is pretty neat in terms of income tax - I pay 4.24% of Quellensteuer! According to my Lohnblatt, additionally to that, I also pay AHV-Abzug of 5.12%, ALV-Abzug 1 of 1.10%, NBUV-Abzug of 0.50%, BVG-Pramie (Fixabzug Betrag) of CHF 442.20, and KTG-Pramie (Fixbzug %) Kat. 1 of 0.16%. But I suppose these other “premiums” are not different in other cantons.
By the way, here my cantonal government says that I need:
– year-end statements of all your bank and securities/custody accounts showing
interest and dividends earned
– Documents regarding purchase and sale of bonds, equities, funds etc
Do you know if IB sends any statements at the end of the year with a summary of my investments, so I can show that to the tax collector?
You don’t need to attach any of that to your tax declaration. Bank statements aren’t needed either. Keep them for your reference while filling the form and send them only when they have questions and ask for the proofs. The only form where they insist on always sending the statements upfront is DA-1, and only for reimbursing the 15% additional US withholding from swiss brokers.
IB doesn’t send you any paper statements, but you can get electronic statements for arbitrary periods online in your account at any moment
I have IB with VT investments and CT with iShares MSCI World and Barcley Global Bonds investments. IB is not a Swiss broker, but CT is. So does it mean that I’ll have to fill DA-1 for my investments in CT? Maybe I should just move my CT investments to IB, so that Swiss brokers rules don’t apply for it.
And what about US? Do I have to fill the tax declaration for them because of my investments in IB? Does IB help with that?
If you have to pay taxes in Switzerland on dividend income, which is not certain so far in your case, you may file DA-1 to recover foreign withheld dividends to prevent double taxation. Swiss withholding taxes for CH securities are reclaimed by listing them in the main WV form in the column “with withholding tax”.
Additionally, for US-domiciled securities, held with a swiss broker, if US withholding is at done at reduced rate of 15%, the swiss broker is locally obliged to withhold 15% more for a total of 30% - you get this money back with DA-1 as well. They need a statement from your swiss broker about this withholding to be sent together with DA-1
Filing with US IRS is not usually necessary, unless you’re a citizen or somehow a tax resident of it otherwise. If US withholding is 30%, maybe you’d need to file something to get a part of it back, but this is avoidable by choosing a good broker - a “Qualified Intermediary”
Great! Thanks @hedgehog for help. So it seems that next year I need only WV and DA-1. That shouldn’t be too complicated I guess. In the meantime, I have to learn some German so I can actually understand these forms.
Do ALL dividends earned on ETFs (incl. US domiciled) held at IB need to be declared on the Swiss tax declaration as additional income?
Or do only Swiss domiciled ETF dividends need to be declared?
(disclaimer: I’m not an expert and I might be wrong here)
You will need to pay Swiss income tax on US dividends so you need to declare them. Then you can offset the US paid tax.
Everything needs to be declared.
Don’t try to “forget” something, that won’t work anymore since AEOI is now in effect. They’ll know
How to manage the selling of ETFs in terms of taxes? According to this
if you sell your ETFs and gain more than 50% of your salary, they may qualify you as a professional trader with huge income taxes. What happens if you are retired and don’t work at all? What is the tax efficient way to get your capital gains without being taxed on them?
So don’t sell. It’s unsustainable anyway if you take more than half of income in capital gains: dividends (=income) are, like, 2% now, and if you have to sell another 2+% of the portfolio every year, your withdrawal rate is over 4% => unsustainable.
I suppose you’d have to rotate into higher dividend paying stocks closer to end of life or real estate to optimize swiss taxes.
There’s also no telling what the tax code will be like in the future, or even in which country you’ll end up in, if your retirement is not yet on the horizon for you. This 50% thing is only from 2012.
Hello, I’m very interested to know how Taxes on Trading Profits works in Switzerland. I’m thinking to buy US domiciled ETF’s and benefit from swiss-american tax treaty (witholding Taxes). However at some point in the mid term future , I know I’ll move back to my home country (Spain) and unfortunately US has no estate tax treaty with Spain therefore US domiciled ETF’s will not be anymore beneficial as Spanish resident.
Because I thought there are no rules to qualify as a private investor and Switzerland has no capital gains tax, the transition of my portfolio just before moving to Spain from US domiciled ETFs to Irland domiciled UCITS ETF portfolios could be done with no unwanted tax issues.
Assuming I do not stay out of the market but simply switch everything at once, this could be consider as a trading Profit ?
At the end , the asset will be invested in the exact same underlying assets – that is, the same stocks, bonds, and so on – both before and after. All I want to do is changing the ‘ETF vehicle’ through which you hold them for a better tax outcome as a buy and hold investor.
I have found this “Tax Bulletin” which explain more in detail what is already explain in the moneyland article link you posted.
Management of private wealth Capital gains on securities are tax-exempt as long as the purchase and sale of the securities does not exceed the simple management of private wealth. According to Swiss tax practice, simple management of private wealth always exists if the following criteria are cumulatively fulfilled (safe haven rules): - The holding period of the sold securities was at least 6 months. - The total of the purchase prices and the sales profits of one calendar year do not exceed five times the value of the securities and assets as of the beginning of the tax period. - The capital gains on securities are not necessary to cover the living costs (this is generally the case if the realized capital gains do not exceed half of the net income in the tax period). - The investments are either not leveraged or the earnings (e.g. dividends) exceed the pro rata interest on debt. - The derivatives (especially options) are bought and sold for hedge purposes only. If the above-mentioned rules are cumulatively fulfilled, capital gains on securities can be realized without triggering taxes. Otherwise, it must be decided on a case by case basis whether the realized gains are the result of professional securities trading or of simple management of private wealth.
Based on the recent jurisdiction of the Swiss Supreme Court, the following criteria are of primary importance: - Frequency of the transactions and holding period - Use of substantial borrowings for the financing of the trades - Use of derivatives The following criteria are of secondary importance: - Proceeding systematically and methodically - Close connection between the transactions and the professional activity as well as the utilization of specific know-how
Hi Hedgehog! Thanks a lot for the information, very helpful. I have further questions:
I think we need to do the “ergänzende Veranlagung zur Quellensteuer”, (as we are taxed at source, but above the thresholds for our wealth and foreign dividends). I found the 4 pages of the Steuererklärung 2018 on line, and also the Wertschriften-und Guthabenverzeichnis, where I understand I need to list my foreign securities and dividends (in column B as not Swiss withholding tax on them)
My question is: where do I enter my salary, as it is already taxed at source (Quellensteuer)?
- Do I enter it on page 2 of Steuererklärung in 1.1 (Lohnausweis)? But then it seems to double the Quellensteuer and be more like a “naträgliche ordentliche Veranlagung” for salary above 120K, which is not my case.
- Do I ignore the 4 pages of the Steuererklärung (as already taxed at source), and only submit the Wertschriften-und Guthabenverzeichnis? I see indeed comments for colums A and B at the bottom of page 2, which mention Salär-. Do I put my Swiss salary in column A of page 3 and my foreign dividends in column B?
- Or is there a totally different document for the case of “ergänzende Veranlagung zur Quellensteuer”?
Many thanks in advance for answers and advice!
Contact your tax office, inform of your situation, they’ll send you the forms. AFAIK they only want to see Wertschriftenverzeichnis for ergänzende Veranlagung, not the full tax form with all deductions - just enough to see what ergänzende taxes they can slap you with.
Or don’t. You know, it’s not a crime to not file taxes in this country. Note however, if your broker is non swiss, they will get info on you from them sooner or later via AEOI, and maybe then might ask to file (or not), cooperate if they do ask and everything’s going to be just fine. Potential downsides: more interest for late taxes might accrue and if foreign dividends are involved there’s only 3 years time to claim them back via DA-1 to avoid double taxation; if you wait and file too late you might miss this window.
Do I put my Swiss salary in column A of page 3 and my foreign dividends in column B?
Only interest and dividends go into Wertschriftenverzeichnis, not salary. Column A or B depends on whether swiss 35% withholding was taken from you and you want it back
@hedgehog You have impressive knowledge with this stuff. Do you know what exactly can be deduced as costs of management? Broker fees> TER? Stamp duties?
You can check the Wegleitung. “Kosten für die Verwaltung des beweglichen Privatvermögens”.
From what I understand sales and acquisitions costs of directly owned securities are not meant to be deducted.
Custody and administrative fees should be.
I’ve always wondered whether ETF can count as third-party managed security (then TER would seem fair to deduct).
I guess, someone can figure that out when they cross the 2M CHF threshold (at which point they’ll have to decide if they just ask for the max pauschale of 6k, or if they itemize it, but if your average TER is lower than 0.3% I doubt itemizing would be a win, assuming they accept TER as a third party administrative fee).
[using Zurich numbers for pauschale and max, they might differ from other places]
Yeah, if you don’t have 2M yet just deduct 0.3%, most likely your actual costs with low cost brokers and funds are far lower anyway