Just hold your US etfs with an CH broker.
Buy with IBKR, transfer the securities regularly to your Swiss broker, profit.
The IRS still gets its 15% cut.
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Example (with the UK having a 0% WHT regime on stock dividends):
- UK stock distributing dividend to US-domiciled ETF: 0% withheld.
- US-domiciled ETF distributing to you: 15% withheld (you can receive Swiss tax credit through DA-1, mine was less than 15 percentage points though), if youâve filed W8-BEN as a non-resident with the broker
- Optionally: Holding ETF through a Swiss broker / payment agent: additional 15% withheld (can get refund through R-US)
Whereas
- UK stock distributing dividend to IE-domiciled ETF: 0% withheld
- IE-domiciled ETF distributing to you: 0% withheld
- Holding IE-domiciled ETF through a Swiss broker / payment agent: no additional withholding
Thanks for this detailed explanation. Are you referring to level 1 withholding tax according to dataset 1? It is my understanding that 0% withholding tax is not the most prototypical example since most countries have more than 0% withholding tax. Feel free to disagree with me on that.
Still, Iâm interested in understanding the details of your example. Assuming I hold VT at IB. When HSBC pays their dividends (letâs say the dividend is 100), VT receives the full amount, 0% withholding. Assuming I have filled my W8-BEN, VT pays me 100-15=75. Assuming I get the full Swiss tax credit through DA-1, I get 15 back when I declare VT on my tax return. So my loss is 0.
Alternatively, assuming I hold VT at Saxo, Saxo pays me 70. I can get 15 back through DA-1 and 15 back through R-US.
Looking at the overall picture, I am wondering how much of the Swiss population would, like me, have a 0 loss in this example if they filed everything correctly. In a wild and completely uneducated guess I would assume that 70-80% of Swiss population above the age of 25 and with a C permit or Swiss citizenship would have 0 loss. For people with B permit and Quellensteuer, it is probably much less.
In a wild and completely uneducated guess I would assume that 70-80% of Swiss population above the age of 25 and with a C permit or Swiss citizenship would have 0 loss
Considering how I am the most average Swiss person on this forum and remember receiving less than 15 percentage points credit through DA-1, Iâd bet against that.
(happy to double-check next week. Note that I corrected my post above to state that was for DA-1, not R-US)
Going by the headings, yes, though the figures highlighted yellow really seem off to me.
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Do you mean âaccumulatingâ ETFs? I did not hear that ETFs holding instruments that produce capital gains (e.g. futures, options) get their gains reclassified. Or did you mean holding intransparent intsturments (as opposed to transparent instruments) as defined in Kreisschreiben 15?
I think when I checked synthetic ETFs are usually transparent and so get taxed for each component.
Easy to verify on ictax.
Edit: and thatâs what I love about swiss tax system it tends to not reward creative hacks, if you get the return of the index, it doesnât matter how you constructed it, you get taxed like all the I dex investors.
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I mean swap-based ETFs such as https://www.justetf.com/en/etf-profile.html?isin=IE00BYM11H29.
âBei kollektiven Kapitalanlagen, welche ihr Exposure synthetisch replizieren, ist zwingend ein gesondertes Steuerreporting fĂŒr Schweizer Einkommenssteuerzwecke zu erstellen, aus welchem die Rendite des(r) Basiswerte(s) hervorgeht. Massgebend fĂŒr die Ermittlung des steuerbaren Ertrages von Swap-based ETFs, welchen Aktienindizes zugrunde liegen, ist die Nettodividenden-Rendite (net dividend yield). Darunter ist die Bruttodividenden-Rendite der entsprechenden Indizes, abzĂŒglich der anwendbaren Quellensteuern zu verstehen. Die Nettodividenden-Rendite fĂŒr alle wichtigen Aktienindizes wird von den anerkannten Providern publiziert und kann fĂŒr das Steuerreporting verwendet werden.â
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Sythetic products that try to replicate an index (that includes dividends), will be taxed like if they received that dividend. So far all of them have been swap based ones afaik. But would likely also apply to other derivative base ones.
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Can you further explain this please? Was not aware of it & how it works.
My (still limited) understanding: Payment of US withholding tax is based on the tax rate of your income. Big debt (mortgage) reduces your income, so you might not receive the full 15% US dividends back.
What Iâm not sure: how big would your mortgage need to be so that you are affected by it? Is it more a theoretical discussion? Or does it apply to many current home owners (define many âŠ)?
Xtrackers just launched an FTSE All world for 0.07% TER.
https://etf.dws.com/en-ch/IE000L6ZMMC4-ftse-all-world-ucits-etf-1c/
This is probably the best all-in-one & all-european solution you can get now. As Xtrackers is a german company. And they imo have a lot better track record than Amundi. Also the FTSE is the better index imo as well, compared to Solactive.
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From a Swiss resident perspective, when receiving US dividends, they can be reduced by up to 30%:
- Withholding tax of 30% on US dividends:
- This is reduced to 15% if you fill out the W-8BEN form, where you declare that your residency is in a country that has a double tax treaty with the US (like CH has). If you donât fill out that form, or your broker is not recognized as a qualified intermediary, the withholding tax stays at 30%.
- As a Swiss resident with a broker like IBKR, Swissquote or Saxo, the rate is 15% â if it is not, thereâs something wrong. My first US dividend payment was reduced by 30%, even though I filled out everything correctly. So I had to contact IBKR support, which fixed it within a few days.
- Contrary to R-US (see below), you are not guaranteed to get these 15% back in full.
- R-US is a deduction of 15% on US dividends that is only carried out by Swiss brokers/banks if you filled out the W-8BEN form. You will always receive the entire amount back when you declare it in your taxes. If you hold VT with a non-Swiss entity like IBKR, it is not applied. It is the equivalent of the 35% âVerrechnungssteuerâ applied to returns originating in CH.
How much you get back basically comes down to this: of the total tax sum you pay in a given year, how much of that is because of the dividends you received? This is the maximum amount you âget backâ (although âget creditedâ is more precise). You basically declare âI already paid the taxes you want from me in form of withholding tax to the USâ. So the CH tax office lets you off the hook for those taxes on the US dividends.
Examples:
- In 2024, you received CHF 1â000 US dividends, reduced by 15% US withholding tax, so CHF 850 in your account. Your tax bill for the year 2024 is CHF 5â000, and CHF 100 of that are because of those dividends. So you get credited CHF 100 and your tax bill is reduced to CHF 4â900. You lost out on CHF 50 US withholding tax.
- In 2025, you received CHF 1â000 US dividends, reduced by 15% US withholding tax, so CHF 850 in your account. Your tax bill for the year 2025 is CHF 20â000, and CHF 190 of that are because of those dividends. So you get credited CHF 150 and your tax bill is reduced to CHF 19â850. You got credited the full amount of withholding tax, but still need to pay the remaining CHF 40 taxes on those dividends.
Now for how to get to the âCHF xxx are because of those dividendsâ:
- Letâs take the tax bill from 2025 and only look at the income tax, which is CHF 19â000 (wealth tax is not relevant).
- The amount of income tax in relation to your net income is your average tax rate. Letâs say CHF 100â000 taxable net income and CHF 19â000 income tax â 19% average tax rate.
- Now letâs apply the average tax rate to the dividends: CHF 1â000 taxed with 19% are CHF 190. Of the entire income tax bill, CHF 190 are because of those dividends.
This amount you can get credited will be reduced if you have taxable income deductions for interest on debt (like a mortgage) or wealth management costs:
- Interest on debt (starting from 2029, interest on debt can no longer be deducted, so it will not reduce the max withholding tax credit anymore):
- Letâs say you have CHF 500â000 mortgage at 2%. This leads to yearly interest of CHF 10â000.
- You also have a wealth of CHF 800â000, of which CHF 50â000 are US stocks.
- By definition, interest on debt is the cost to finance your total wealth. Your US stocks make up 6.25% of your total wealth, so CHF 625 of your interest is used to finance it.
- Wealth management costs:
- Letâs say you have CHF 100â000 in stocks, of which CHF 50â000 are US stocks.
- You received CHF 4â000 in dividends, of which CHF 1â000 were from the US stocks.
- You deduct CHF 300 wealth management costs. By definition, these are costs for achieving a yield on investments. A quarter of your yield was because of the US dividends (CHF 1â000 US dividends of CHF 4â000 total dividends). So one quarter of wealth management costs (CHF 75) is because of the US dividends.
- In other words: because of the US dividends, you were able to reduce your taxable income by CHF 75.
- Putting it all together:
- You reduce your taxable income with deductions. Your US dividends are part of that taxable income, so deductions (only those that are affected by dividends, i.e. interest on debt and wealth management costs) apply partly to those US dividends.
- We take the US dividend and deduct interest on debt and wealth management costs, but only the parts that apply to it, as calculated above: CHF 1â000 - CHF 625 - CHF 75 = CHF 300.
- Now we take your average tax rate to calculate the part of your income taxes that apply to the US dividends: CHF 300 Ă 19% = CHF 57.
- Youâll get credited those CHF 57 (so your tax bill is reduced by CHF 57) on your Swiss tax bill, as you already paid CHF 150 withholding tax. You lose out on the remaining CHF 93 withholding tax.
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Would you guys sell VWRL to buy Xtrackers XALL if you were using a Swiss broker?
-0.12% TER difference but also one time +0.15% x 2 stamp duty + spread + small fee for the broker and SIX.
It takes ~4 years to break evenâŠ
What about tracking error? Is Xtrackers(!) as good as Vanguard? Anything else in favor of one or the other?
VWRL still has a very low (even negative) tracking error.
Vanguard FTSE All-World UCITS ETF (IE00B3RBWM25) - ETF Tracking Differences and Performance
It will take some time to see whether Xtrackers can beat thatâŠ
Me personally I wouldnât bother selling VWRL.
What you could do though is starting to invest in XALL instead of VWRL and make your choice later on.
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Why do you think FTSE AW is beter than Solactive? Lower SC cutoff or something else?
Just checked, the fund is new and now heavily sampled, some 1600 stocks out of 4250 or so in the index â expect significant tracking error, at least in the coming months. I would wait and see how it develops â would not sell Vanguardâs VWCE yet.
Speaking about VWCE, there is something interesting going on, which is diffucult to understand. It has underperformed the gross benchmark more than the dividend leakage L1 and TER would suggest. Compared to the performance of the combo Developed (VHVE) and Emerging (VFEA) at MCW, it underperformed it by 14 bps per year over the past ±6 years, while the TER difference was 9 bps. This is hard to explain. I hope that yet to launch global all-cap would do it better.
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Here is what I calculated from previous years ( kanton ZH)
Letâs say your marginal tax rate is 25% and your effective tax rate is 16%.
Example:
You are taxed on your net salary + 100$ (from dividends) - asset management cost (AMC) - mortgage/margin loan interest (MLI) paid.
â The last 2 items reduce your income. So you save on those at your marginal tax rate 25%)
when you apply for DA-1 refund. you can get effective tax rate(16%) multiplied by following :
DA-1 Relevant Dividend
MINUS
(DA-1 relevant dividend paying assets / all worldwide assets) * MLI
MINUS
(DA-1 relevant dividends / total dividends) * AMC
What matters is not the size of mortgage but the interest amount of mortgage or margin loan.
I would wait a bit for aum to catch up and look how they are tracking the index. But absolutely yes I eventually would do this (unless they are tracking the index very badly, which would be quite unexpected regarding xtrackers track record).
Better Pedigree and more established and bigger coverage of investible universe ~4.3K stocks vs ~3.5K stocks, so yes smaller caps are in there. Those would be the main points for me.
Also Amundi additionally makes some discretionary ESG like exclusions on top. Nothing major, but still discretionary.
So eventually once the fund matures and attracts aum, itâs gonna be clearly better imo.
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