Usd deposit rates

Investing / Others
1

Hello Mustachian

I am a new joiner of the Mustachian community.
I have some usd on my Interactive Broker (IB) account.
The saving rate is currently 1,88% above 10k. It’s not 0, but IB is taking a 0,5% on the raw rate. A us resident can currently get ~2,4/2,5% on his retail banking account.

Does any mustachian has any tweak or advice to get a better rate on usd saving account, for a Swiss resident ?

Thanks

2

Maybe a short term bond ETF (be aware that it won’t be insured unlike a cash position at IB).

3

Thanks nabalzbhf for your answer however that’s is not really the same asset. The risk is not the same. I already have bond etf in my portfolio. I am only wanting to optimize my deposit rate on my usd cash balance.

4

…as long as you are having 100k+ in assets with them.

Easisave has 2.5% or higher rates on (short) term savings.

  • Should (still) be openable by Swiss residents, quite straightforward.
  • No withholding tax on interest to non-residents.
  • Reference bank account required in your name in the EEA. As stated, not sure how they handle CH, which, though technically not an EEA member, might be considered an equivalent jurisdiction for CDD/AML purposes).
  • Don’t forget about SWIFT transfer fees.
  • Do your research on depositor compensation. They do seem to differ between EU countries regarding currencies covered - though a quick googling suggests Malta’s scheme should cover any currency.

I’ve had an account (EUR) with the bank for a couple of years.

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5

Interesting. Thanks for the details. I will check this opportunity

6

It’s not insured, right? So why not use a short term T-bill ETF or your own T-bill ladder? That should have ~same return.

7

It will probably be one of the easier accounts to open. For me, even though everything felt a bit “old school”, opening was quite straightforward. Has been working similarly since then.

The bank operates within the EU/ECB framework and oversight, which I generally have little reservation about recommending (especially when you look at it from a more global perspective). Though of course amongst EU countries, Malta has one of the “sketchier” reputations as a banking jurisdiction, in recent years (Satabank, Nemea Bank, Pilatus Bank). I am personally not too concerned about the bank, which has been around for 25 years or the deposit guarantee scheme in event of a single-bank failure.

But it’s certainly more a suggestion to make up one’s own mind about, than a recommendation from my side.

8

Why shouldn’t it?

As I said, some (EU) countries have limited their deposit guarantee schemes to cover only EU and/or EEA currencies. Malta does not seem to do so. (though you’d better keep your tabs on that provision and potential changes to it)

9

It might be possible at Schwab with the “Money Fund Sweep Feature”. Hard to find out concrete details.

10

Ok thanks for your advice.
At the end I am considering to invest in BIL etf (https://www.etf.com/BIL)

Do you know if it changes something in term of taxation (swiss resident) :

  1. If I am invest in cash on IB (cash income are tax as dividend ?)
  2. vs If I own the etf BIL and get the dividends

Thanks

11

I wrongly assumed fixed term deposit may not be covered, but seems like they are in similarly protected to regular accounts in EU.

12

BIL ETF, whatever the US might withhold you get back through DA-1, all income will be taxed same as regular income in CH.

Interest on cash in IB is taxed like regular income.

13

US should withhold nothing. CH will credit nothing.

14

Ok so if it is for more than 6 month the best solution is BIL etf. (If the position is hold less than 6 month I can be considered as a professional investor). Otherwise I should let the cash on IB account.
Thanks everybody for your answers

15

Unlikely

16

I have found this Link

Sorry it’s in French, but It seems that you may have to hold the position at least 6 month. Otherwise you may be reconsidered as a professional investor. And professional investor are taxed on capital gain while private one are tax free.

Is this rule not applied as pandas suggested ?

17

Those rules only specify the conditions under which you definitely won’t be considered a professional trader. Violating them doesn’t mean that you will treated as one, just that they may review your situation as a whole and make the decision on a case by case basis. The bar for being classed as a professional is far higher that a single short term sale.

18

There is a general misunderstanding in this forum about the qualification as “professional investor”, mainly due to lack of context.

  1. There are a number of relevant criteria case law has established for that. Those are collected in the often cited lists of tax authorities.

  2. The basis of these criteria, their object and purpose, is the decision by the Swiss lawmaker NOT to tax private investors with capital gains.

  3. The criteria in the lists are designed not to give clear-cut determinations for 2 reasons:
    a) It’s a case-by-case determination which has to be taken in the light of object and purpose of the differentiation between private and professional investors.
    b) It is not in the interest of tax authorities to draw a clear line, as this would help to avoid taxes.

  4. So what does a rather cautious private investor do (object and purpose)? He invests saved money in the stock market. He is cautious with debt. She may use derivatives, to secure her positions. He does not check daily / hourly the prices and thus does not often enter / leave positions. Change of strategies happen. Being a trader by profession does put you nearer to the line. As does gaining a lot of money through buying/selling and even living off the profits.

  5. Just occasional buying and selling is not the hallmark of a professional investor. Neither is selling assets and living from them after a lifetime of saving. Otherwise, all investors would be professionals. This would violate the mentionned object and purpose.

  6. Keep in mind 2 things:
    a) Tax authorities do not like the exception for free private capital gains, but they have to and do respect the decision of the legislator. There was a popular vote about this if I remember correctly.
    b) Any determination of “professional investor” is a double edged sword for the taxman: It also allows for the deduction of costs of business as well as LOSSES. Such a determination cannot be changed arbitrarily. Thus, tax authorities became much more cautious in the aughts (after the roaring nineties).

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19

Tax authorities don’t actually care, they just enforce the tax law, and try to stop people from violating it.

Then the executive do care about tax law and what they can tax, because it influences income and thus influences what they can spend. But they can only do this within the framework that laws provide.

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