you get all your taxes back on your dividends with your tax declaration. so we can say that dividends are not taxed as long as you have a job. when the time comes and you retire you will be taxed for capital gains too because thats your main source of income.
You may have read much of the talk about the tax efficiency on this forum and it’s accompanying website about the tax efficiencies of U.S. ETFs (for U.S. dividends) but must have misunderstood.
You “may get” back, i.e. reclaim or set off U.S. withholding taxes (as well as Swiss, if applicable).
But you will have to pay Swiss income tax on the (gross) distribution according to your personal tax rate.
Since you would, as per my example (lower dividends but similarly profitable companies) otherwise not have these dividends, you may as well consider paying your marginal tax rate on this. Which can be easily 30% in Switzerland.
That is not true for normal Swiss individual investors.
Keeping, holding and then at some point selling an asset years later to live off the proceeds does not on itself confer the - much talked-about - professional trader status. Source of income is only one indicator in determining that. No tax authority will you consider that and tax you on the capital gain for just liquidating an equity fund position you’ve held over many years (according to current Swiss law, that is).
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I thought I only get taxed with withholding tax that I get back later.
See also this topic where I asked spcifically this question:
Got different answers there than yours now.
Either way, I stick to my assertion.
Withholding taxes are (in most cases, for Swiss investors) not final. They do not substitute for your ordinary income tax. You can not pay withholding tax, reclaim that tax (possibly) and be done with it. Irrespective of withholding taxes, you have to pay Swiss taxes on that taxable income (gross) from the distribution. Even if it means you’re double-taxed - if, for some reason, you are unable to reclaim withholding tax.
PS: Actually you do not get different answers in the linked thread:
@Cortana’s question: “How about someone that retired early with 3M in assets and 70k in dividends (only source of income) of which 11k are withhold?”
@jay’s answer: “Taxable income from assets: 70k - 9k = 61’000”
Swiss income tax will have to be paid on that taxable income of 61’000.
You can also easily confirm by making a mock tax return with your canton’s tax software:
- Enter CHF 100’000 of employment income.
- Do the tax calculation in the software
- Now add another 1’000’000 of VT or any other U.S. fund listed in the ICtax database (it think it will even offer to add it to DA-1 in your canton’s software).
- Rerun the calculation → the tax calculated will be higher.
PPS: To clarify again:
You may get all withholding taxes back through to your tax declaration.
And the thread you linked above is about DA-1 forms to reclaim withholding tax.
The potential tax inefficiency I was referring to above is not about withholding tax in particular.
Say you hold 100’000 of a U.S. ETF that no management/upkeep costs and isn’t subject to WHT itself.
The fund receives 5’000 from the U.S. companies it holds for every 100’000 of stock they’re holding.
It will then distribute this 5’000 in dividend income in full to you, for a dividend yield of 5%.
15% of 5’000 (or 750) are withheld in U.S. withholding tax.
You can reclaim the 750 in full through the DA-1 form
You will still pay Swiss tax, say 20% (or 1’000) on the gross amount of 5’000.
That leaves you with only 4’000 net income to reinvest in more fund units.
If all of the companies held by the fund didn’t distribute anything but used these 5’000 to grow their businesses themselves, the ETF - and ultimately you - would only incur capital gains.
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As usual, private investors chasing past winners.
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5 posts were merged into an existing topic: ETF - trying to understand… case study… accumulating vs distributing
hi
what do people consider as options to diversify investments into stocks/ETFs these days?
feels like VT, SP500 and QQQ are at their local maximums at the moment and news like
https://www.reddit.com/r/ethtrader/comments/13afg8k/fed_reveals_722_banks_reported_unrealized_losses/
plus debt ceiling, stagflation, etc can turn it into another downturn
Feelings are unreliable indicators, I would not follow them.
That being said, CHF may actually fare well in an USD crisis. CHF denominated bonds may work as a diversifier. That would be my bet, over gold or other alternatives.
I am not changing a thing to my allocation myself. The quote “Buy when there’s blood in the streets, even if the blood is your own.” attributed to Baron Rotschild applies to me, here. Of course, in order to be able to buy, one has to survive first.
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thanks for your reply
agree about feelings of course these feelings are based on following the news, reading this forum (which definitely helps to stay calm), etc.
don’t you think that CHF is just lagging in time and in 6 months the effects of macro, CS story, etc will arrive here as well?
agree as well about buying, the question is what? and the whole narrative about US economy getting weaker and loosing dominant position is getting stronger (maybe it is effect of my personal social/internet bubble, sorry feelings again 
)
The Swiss franc is a traditional refuge currency, along with the yen. A US debt crisis would be funelled by the fear of the US Treasury defaulting on their bonds, there is no such fear that I know of regarding the Swiss government (and I would be surprised if we don’t have among the safest of the making good on our obligations reputation, which is a part of the reason the SNB went into negative rates to prevent the franc from appreciating too much vs the euro and the dollar, and got away with it too).
Bonds are not stocks. A banking crisis has few chances to affect the full faith and credit of the Swiss confederacy. Corporate bonds may suffer but you can avoid the banking sector if that seems like a significant risk to you.
I’m not saying there couldn’t be short term bad repercussions on Swiss government bonds too, just that I’m confident they would not move in sync with US government bonds in case of a US Treasury default.
The banking crisis is overblown in my opinion, though it is only that: an opinion. A few more vulnerable banks will probably still fall but we still need the system as a whole. In any case, if the safety of bank deposits are the concern, then government bonds, backed by the full faith and credit of a country that can be trusted not to default on them are a safer alternative.
Also, while past returns are not indicative of future returns, this is the effect of the 2011 US debt crisis on VT (in USD, with dividends reinvested):
If you don’t need the money on the short term and trust the world’s economy will recover and prosper, chances are staying invested will bear fruits. If you need the money on the short term, then yes, I would take it out of the market right now and not put the part I need in again no matter how bright the future of stocks looks.
This is not to say I don’t think the US will default on their debt: I fully trust they may get to it at some point, maybe this time. However, if they don’t, the relief on the markets has good chances of being quick. I want to capture that more than I want to avoid a potential (very) long period of pain waiting for stocks to recover.
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Also:
VT is globally cap weighted, if the US economy falters and (an)other country(ies) with (an) investable stock market(s) pick(s) up, VT will capture that. Such can’t be said of US only funds (tracking the S&P500, the NASDAQ composite, etc.)
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…but (likely) not compensate for that, given that the U.S. currently makes up for 1.5 times the rest of the entire world in that index. And it’s not as if non-U.S. markets will grow because of the U.S. economy faltering (that is, substituting for the U.S. economy in the world index).
If you believe that - or at least want to limit the risk of it - I suggest you underweight the U.S. in your portfolio (below its share in common “world” indices and index funds, such as VT).
That said, Europe doesn’t seem in the greatest shape either, due to the energy crisis/rising energy prices, does it? So what your alternatives? Japan, Australia, China or the developing markets?
Switzerland 
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You could just cap US equities and keep market weighting the rest. The same approach is seen in other funds that would have very high allocations in one category otherwise. E.g. many funds on the SMI cap Nestle even though Nestle surely is a quite diversified company. But Nestle has certain idiosyncratic risks, which the market probably does not compensate for, since you can diversify.
The US economy is even more diversified, but it too has single points of failure, that you could diversify from. E.g. I’m not sure how many more years of Trump era craziness the institutions in the US can take before warping into something else or descending into civil war. This change will probably not be beneficial to US companies (disproportionally so) and their foreign shareholders.
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Sure. The bet is that someone would rise up to fill the void let by the US stock market and that that growth would then compensate for the previous loss over time.
A collapse of the US dollar would not happen in a vacuum, another mean of exchange would have to be used. Given the current state of things, I consider it likely for it to be another state emitted currency, though some may want to make a case for gold or some kind of cryptocurrency. I trust the country benefiting from than newly acquired status of having a predominant reserve currency to use that advantage to grow their economy, or rather, the two would probably grow in pair and the country(ies) selected would already have a growing economy ready to challenge the US.
That’s the whole Ray Dalio thesis of the changing world order, anyway. I find it convincing, though it is a slow process and we may not live to see the fall of the USD as a reserve currency. Unless they choose to default, in which case, the fight between would be reserve currencies could get more agitated right away.
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Well, the shares of countries will of course always add up to 100%. Someone will take up their (percentage) share of the pie.
But the overall size of the pie is neither fixed - nor guaranteed to be maintained by someone else.
Imagine an alternate history in which some unknown effect had ravaged the United Kingdom in the 18th century. Could have been large-scale social unrest, a war, infectious disease or a natural disaster.
Would the world have seen the same industrial revolution that originated in England during that time? Would you say „Yeah, some other country surely would’ve come up with it as well“? I‘m not sure - don’t think it would have been a given.
Or, as a more concrete and contemporary example: Imagine you‘re highly invested in the semiconductor and software industry. And then the mother of all earthquakes gets unleashed on Northern California, killing half of the population of the world’s Silicon Valley.
Will some other country - or even state in the U.S. - just rise and pick up the slack that industry? Maybe never, probably eventually - but it would likely take many years to decades. In the meantime, you‘d be better off by not having invested 60% in that sector.
Will other industries, say building materials and construction directly benefit? Yes - I don’t think other economic sectors could just replace that market cap. But the replacement likely won’t be 1:1.
Not every country and its respective economy can do what a fail or decline of the U.S. can do.
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Full on Avantis! I’ve got global with VT and then smaller yet equal parts AVUV and AVDV. Anything in avantis I’m missing?
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The emerging market with AVES.
I’m currently 60/40 in stocks and bonds. I will look for opportunities as they arise. In case of recession, I hope that energy/commodities might then go back to an attractive valuation - if so, I’ll pile into them. I’m mostly in short duration assets now.
More impotantly it is uninverting by the long end rising. Additional US issuance probably means 10 year has further to rise.
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