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  #101  
Old 31.12.2016, 14:53
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Re: Low Cost Broker with no Regular/Custody Fees

I am an resident of India, i have 5000 CHF to invest in swiss equity exchanges directly (i dont want to invest in ETF, would invest directly). Please answers me the following query below if i open an account with IB:

1) What would be the commission charges in tiered pricing for delivery transactions in only SIX stock exchanges, also give me the breakup of taxes levied after execution of delivery orders.

2) What would be an annual maintaince charges for the trading account.

3) What would be the interbank charges for allocation / deallocation of funds. Time period required to transfer the fund in my account after sale of any equity.

4) If dividends are paid by any swiss / nonswiss company listed in Switzerland, how would they be credited in my accounts. are there any charges.

5) Taxes on profit done on capital gains in Switzerland.
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  #102  
Old 31.12.2016, 23:32
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Re: Low Cost Broker with no Regular/Custody Fees

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I am an resident of India, i have 5000 CHF to invest in swiss equity exchanges directly (i dont want to invest in ETF, would invest directly). Please answers me the following query below if i open an account with IB:

1) What would be the commission charges in tiered pricing for delivery transactions in only SIX stock exchanges, also give me the breakup of taxes levied after execution of delivery orders.
Why don't you just look up yourself: https://www.interactivebrokers.com/e...p?f=1299&nhf=T (EBS = SIX exchange)

As I rough guide, it's an order of magnitude more expensive than trading on US stock exchanges, and an order of magnitude cheaper than what swiss brokers would charge you. No swiss stamp tax duty to pay with IB.

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2) What would be an annual maintaince charges for the trading account.
$120 if you keep less than $100k. Commissions are deducted up to $10 per month.

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3) What would be the interbank charges for allocation / deallocation of funds.
What does that even mean?

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Time period required to transfer the fund in my account after sale of any equity.
A few days for the sale to settle (for IB to receive funds from counterparty) + time for a bank transfer. I usually get money on my swiss bank account from them within 1-2 business days. India maybe would be a bit longer. But if you deposited the money just recently, I think there's a long waiting period of a couple of months or so until you can withdraw the funds you've just deposited. There's a page in account management which shows how much withdraw now and how much is waitlisted.

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4) If dividends are paid by any swiss / nonswiss company listed in Switzerland, how would they be credited in my accounts
Back into the cash part of your IB's portfolio.

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are there any charges.
35% withholding tax for swiss securities. I don't think they charged me anything on top of it, no any kind of "admin" fee unlike some other brokers.

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5) Taxes on profit done on capital gains in Switzerland.
As an Indian resident you would have to pay taxes in India, not in Switzerland. Swiss withholding tax is fully reclaimable, your indian tax officials should know how. Main case where you'd have to pay capital gains here is on a real estate sale only.

Last edited by ivank; 01.01.2017 at 00:24.
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  #103  
Old 02.01.2017, 15:23
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Re: Low Cost Broker with no Regular/Custody Fees

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2) What would be an annual maintaince charges for the trading account.

$120 if you keep less than $100k. Commissions are deducted up to $10 per month.
When i had read on IB's website it say, there are 2 options:
1) Fixed - wherein you can pay 10 CHF as commission of any amount of transactions on per transaction basis.
2) Tiered - wherein you can pay 1.25 CHF or 0.08% commission whichever is higher for the transaction amount less than 1,00,000 CHF per transaction.

Can you confirm for the same.

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3) What would be the interbank charges for allocation / deallocation of funds.

What does that even mean?
What are the commission to convert the amount from INR to CHF, while buying the shares.

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  #104  
Old 02.01.2017, 15:43
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Re: Low Cost Broker with no Regular/Custody Fees

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When i had read on IB's website it say, there are 2 options:
1) Fixed - wherein you can pay 10 CHF as commission of any amount of transactions.
You pay 10 CHF for *every* trade below 10000 CHF, and more for higher trade value.

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2) Tiered - wherein you can pay 1.25 CHF or 0.08% commission whichever is higher for the transaction amount less than 1,00,000 CHF.
The coefficients are wrong and that's actually how their 'fixed' pricing works. You pay max(0.1%, 10 CHF) per trade.

With tiered pricing, they pass on some of exchange charges directly onto you, so the final price depends on how the order was executed, e.g. was it on bid or ask. Anyway it usualy works out to be cheaper than their fixed pricing, at least for Europe. Read the link again, everything is really spelled out there: https://www.interactivebrokers.com/e...p?f=1299&nhf=T

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What are the commission to convert the amount from INR to CHF, while buying the shares.
Don't know about INR, no experience with it, but for other major currencies they're my forex broker of choice. Really low commissions compared to anything else I've seen on the market, like a few to low tens of dollars to converts 100k's. It's basically at the level of minute market rate fluctuations, so I can't care any less about exact pricing.

For a small amount like 5k, you should convert it all in one go, and not every time before a trade, as they have some surcharge for small orders below 15-20k$. I.e. you wire them 5000 CHF equivalent in INR, do a forex trade first to convert all of it to CHF, then buy stocks in CHF. I'd guess 5k conversion would cost you a couple of franks or so, compared to fair intrabank rate.

Last edited by ivank; 02.01.2017 at 16:02.
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  #105  
Old 02.03.2017, 12:07
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Re: Low Cost Broker with no Regular/Custody Fees

I am in quite a dilemma regarding ETF investing via IB.

About 3-4 ETFs each month, 500-1000GBP each.

I want to stay clear of US domiciled ETFs due to US estate tax and who knows what other implications. Ishares ETFs domiciled in Ireland seem the best choice.

Also, I would prefer Accumulating ETFs. However, no accumulating ETFs may be traded on the NYSE. However, the interactive brokers fees for ETFs traded on the London SE are 6GBP vs 1USD for NYSE.

So the question is:

- Is there a way to have accumulating ETFs domiciled outside the US without paying very high trading fees?

Is the tiered pricing of IB an option open to everyone or just certain types of investors (is it my choice to have fixed or tiered pricing)? As I understood, it is 0.08% or 1GBP min, which means that for trades below 7'500GBP, the tiered pricing would be favourable.

Am I missing something?
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  #106  
Old 02.03.2017, 18:23
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Re: Low Cost Broker with no Regular/Custody Fees

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Is the tiered pricing of IB an option open to everyone or just certain types of investors (is it my choice to have fixed or tiered pricing)? As I understood, it is 0.08% or 1GBP min, which means that for trades below 7'500GBP, the tiered pricing would be favourable.
Ir's open to everyone. But keep in mind that in addition to that 0.08% fee (for the lowest volume traders), IB will pass on all of exchange's fees - see price list by exchange. And for some exchanges there will be also country specific duties and taxes. For example you may want to avoid LSE for this reason. Trading on SIX is stamp duty free for non swiss brokers like IB
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  #107  
Old 02.03.2017, 19:05
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Re: Low Cost Broker with no Regular/Custody Fees

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Ir's open to everyone. But keep in mind that in addition to that 0.08% fee (for the lowest volume traders), IB will pass on all of exchange's fees - see price list by exchange. And for some exchanges there will be also country specific duties and taxes. For example you may want to avoid LSE for this reason. Trading on SIX is stamp duty free for non swiss brokers like IB
And for the fixed rate they don't?
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  #108  
Old 02.03.2017, 19:23
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Re: Low Cost Broker with no Regular/Custody Fees

No, but the fixed rate is correspondingly higher. Taxes and stamp duties should be charged regardless
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  #109  
Old 03.03.2017, 10:14
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Re: Low Cost Broker with no Regular/Custody Fees

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Ir's open to everyone. But keep in mind that in addition to that 0.08% fee (for the lowest volume traders), IB will pass on all of exchange's fees - see price list by exchange. And for some exchanges there will be also country specific duties and taxes. For example you may want to avoid LSE for this reason. Trading on SIX is stamp duty free for non swiss brokers like IB
But the fixed rate on IB for SIX is 10CHF vs 6GBP for LSE.

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And for the fixed rate they don't?
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No, but the fixed rate is correspondingly higher. Taxes and stamp duties should be charged regardless
even on top of the fixed rate?

So to summarise:

Which way is it better to buy:
1) Accumulating ETFs, Domiciled in Ireland and traded on SIX using the tiered pricing of IB?

OR

2) : Distributing ETFs, Domiciled in Ireland and traded on NYSE using the fixed pricing of IB of 1USD?

Now all I need to figure out is which ETFs and stick to them for 30+ years, but that is a different topic.
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  #110  
Old 03.03.2017, 13:43
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Re: Low Cost Broker with no Regular/Custody Fees

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But the fixed rate on IB for SIX is 10CHF vs 6GBP for LSE.
But you'll pay 0.5% stamp duty on LSE, and 0.0% on SIX.

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even on top of the fixed rate?
Sure why the hell not?

Government doesn't care what kind of deal you have with your broker regarding his commissions.

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So to summarise:

Which way is it better to buy:
1) Accumulating ETFs, Domiciled in Ireland and traded on SIX using the tiered pricing of IB?

OR

2) : Distributing ETFs, Domiciled in Ireland and traded on NYSE using the fixed pricing of IB of 1USD?

Now all I need to figure out is which ETFs and stick to them for 30+ years, but that is a different topic.
All of this probably isn't really going to make much difference in the long buy-and-hold run, it's just microoptimizing, but still:

US exchanges generally are much much cheaper to trade on than european, 1-2 orders of magnitude cheaper. So go for NYSE if you can buy your fund there.

Accumulating vs distributing and Irish vs American is a bit tricky choice

For distributing ETFs, I'd expected american ETFs to do slightly better than Irish, because there's only one level of taxation, not two:
1) Irish: US withholds 15%, pays Irish fund 85%, which they distribute to you and you pay let's say your 39% marginal income tax rate on these 85%: $1 dividend lands as $0.51 post tax dollars in your pocket.
2) American: US withholds 15%, pays 85% directly to you, you pay 39% tax on $1, get US's 15% credited towards it with DA-1: $1 becomes $0.61 for you.
On the other hand you have to actively reinvest dividends yourself and pay trading fees, although they're really minimal with americans. Many distributing ETFs collect and hold dividends as cash until payout date, which hurts reinvesting performance a little bit. Accumulating funds can just buy stocks every time they get the money. Some distributing funds buy for the interim time too, but then they have to sell and this adds trading costs and risks

For accumulating ETFs (all of these are just european, they're not available in US), different ETFs seem to do all sorts of crazy tax stuff differently, so you better pull hard data from Kursliste and calculate for yourself which one did best after taxes in the past years, and hope they'll do it again this year: https://www.ictax.admin.ch/extern/en.html#/search. Also, try to avoid buying before or on the day where Kursliste claims they "paid" dividend, that's the easiest way to save big on taxes at least in initial year.

Last edited by ivank; 03.03.2017 at 14:10.
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  #111  
Old 03.03.2017, 14:25
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Re: Low Cost Broker with no Regular/Custody Fees

Thanks a lot ivank

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But you'll pay 0.5% stamp duty on LSE, and 0.0% on SIX.
Ok so LSE is out unless it is an ETF i really want and is only traded on LSE.


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US exchanges generally are much much cheaper to trade on than european, 1-2 orders of magnitude cheaper. So go for NYSE if you can buy your fund there.
Ideal would be non-us domiciled ETFs but traded on the NYSE, but there are not too many.


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Accumulating vs distributing and Irish vs American is a bit tricky choice

For distributing ETFs, I'd expected american ETFs to do slightly better than Irish, because there's only one level of taxation, not two:
1) Irish: US withholds 15%, pays Irish fund 85%, which they distribute to you and you pay let's say your 39% marginal income tax rate on these 85%: $1 dividend lands as $0.51 post tax dollars in your pocket.
So what you are saying is that even for Irish ETFs, IB will withhold 15% tax on dividends if traded on the NYSE?

Can't I claim back the 15% withheld by the US for irish domiciled ETFs?

Isn't this true?

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However, if you buy an ETF listed in the UK, but domiciled in Dublin, the ETF does all the hard work for you and reclaims the withholding tax on your behalf under the double tax treaty between the U.S. and Ireland.
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2) American: US withholds 15%, pays 85% directly to you, you pay 39% tax on $1, get US's 15% credited towards it with DA-1: $1 becomes $0.61 for you.
On the other hand you have to actively reinvest dividends yourself and pay trading fees, although they're really minimal with americans. Many distributing ETFs collect and hold dividends as cash until payout date, which hurts reinvesting performance a little bit. Accumulating funds can just buy stocks every time they get the money. Some distributing funds buy for the interim time too, but then they have to sell and this adds trading costs and risks
I want to avoid US domiciled ETFs for fear of US estate tax (even though I don't plan on dying soon).

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For accumulating ETFs (all of these are just european, they're not available in US), different ETFs seem to do all sorts of crazy tax stuff differently, so you better pull hard data from Kursliste and calculate for yourself which one did best after taxes in the past years, and hope they'll do it again this year: https://www.ictax.admin.ch/extern/en.html#/search. Also, try to avoid buying before or on the day where Kursliste claims they "paid" dividend, that's the easiest way to save big on taxes at least in initial year.
I looked up an ETF I am considering (iShares MSCI EM Consumer Growth) and ICTax has no info on dividends. Does this mean I don't have to pay anything?

39% marginal income tax rate? You must earn quite a lot

Last edited by EPMike; 03.03.2017 at 14:40.
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  #112  
Old 03.03.2017, 14:37
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Re: Low Cost Broker with no Regular/Custody Fees

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So what you are saying is that even for Irish ETFs, IB will withhold 15% tax on dividends if traded on the NYSE?
No. 15% is withheld by the US. American companies/funds are obliged to withhold 15% before paying out anything to non-residents. Actully that rate is even 30% by default. It's reduced to 15% just thanks to treaties usually.

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Can't I claim back the 15% withheld by the US for irish domiciled ETFs?
No, it's Irish fund's income, not yours.

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I want to avoid US domiciled ETFs for fear of US estate tax (even though I don't plan on dying soon).
It's a valid concern. But AFAIK we discussed recently on this forum that US-Swiss estate tax treaty has a multi-million dollar exemption for Switzerland, rather then $60,000, so it may not be such a big deal after all, but check the text to be sure.

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I looked up an ETF I am considering (iShares MSCI EM Consumer Growth) and ICTax has no info on dividends. Does this mean I don't have to pay anything?
There's no data yet for 2016, probably just noone from the tax office has looked at the fund's 2016 reports yet, but they will.

For 2015 there is data - https://www.ictax.admin.ch/extern/en...65457/20151231 - 0.39917 Fr taxable income per share if you held the fund on 30.11.

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39% marginal income tax rate? You must earn quite a lot
Swiss taxes are highly progressive, you'll be at the highest rates sooner than you'd think
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  #113  
Old 03.03.2017, 15:28
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Re: Low Cost Broker with no Regular/Custody Fees

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It's a valid concern. But AFAIK we discussed recently on this forum that US-Swiss estate tax treaty has a multi-million dollar exemption for Switzerland, rather then $60,000, so it may not be such a big deal after all, but check the text to be sure.
That thread is really good info, I was not aware of that. Reading the wording of US estate taxation, it seems that a foreign domiciled ETF holding stocks of US companies might not get you out of estate tax anyway.

One just make sure his heirs are domiciled in a country with such a tax treaty.

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Swiss taxes are highly progressive, you'll be at the highest rates sooner than you'd think
Yeah, but 39%? I tried teh calculator with 1 mil taxable income per family and still not get to 39%

Last edited by EPMike; 03.03.2017 at 15:43.
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  #114  
Old 03.03.2017, 17:29
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Re: Low Cost Broker with no Regular/Custody Fees

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Yeah, but 39%? I tried teh calculator with 1 mil taxable income per family and still not get to 39%
Have you looked at the marginal rate or the total rate?

This table is an approximation for a single person in canton Zurich (based on Lohncomputer.ch, Social contributions + Quellensteuer). As you can see, the marginal tax rate gets to 39% already above 11'000 per month.

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  #115  
Old 03.03.2017, 17:56
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Re: Low Cost Broker with no Regular/Custody Fees

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Yeah, but 39%? I tried teh calculator with 1 mil taxable income per family and still not get to 39%
With progressive tax rates you really need to look at marginal rates: how much additional taxes you'll pay on an additional chunk of income. In Zurich it maxes out at about 39% for a single unmarried earner pretty quickly after 200k. Which means that out of every 1000 Fr of additional income (such as from dividends), you'll have to hand 390 Fr over to the government. That rate is essentially the derivative of your tax amount at your current taxable income. I have exact graphs if you're interested, can post tonight when I'm home
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  #116  
Old 03.03.2017, 18:20
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Re: Low Cost Broker with no Regular/Custody Fees

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Have you looked at the marginal rate or the total rate?

This table is an approximation for a single person in canton Zurich (based on Lohncomputer.ch, Social contributions + Quellensteuer). As you can see, the marginal tax rate gets to 39% already above 11'000 per month.

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With progressive tax rates you really need to look at marginal rates: how much additional taxes you'll pay on an additional chunk of income. In Zurich it maxes out at about 39% for a single unmarried earner pretty quickly after 200k. Which means that out of every 1000 Fr of additional income (such as from dividends), you'll have to hand 390 Fr over to the government. That rate is essentially the derivative of your tax amount at your current taxable income. I have exact graphs if you're interested, can post tonight when I'm home
you guys are great: you just made me realise I had a completely wrong understanding on how I am taxed.
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  #117  
Old 03.03.2017, 20:35
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Re: Low Cost Broker with no Regular/Custody Fees

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Have you looked at the marginal rate or the total rate?

This table is an approximation for a single person in canton Zurich (based on Lohncomputer.ch, Social contributions + Quellensteuer). As you can see, the marginal tax rate gets to 39% already above 11'000 per month.

However the marginal rate is not the tax rate, it's the tax rate PLUS social contributions. I suspect it's a bad translation of marginal deductions. Social Contributions will be about 6.5% however this depends on canton.

From the table at 11k the tax rate is 25.9%, this is a huge way from 39%. Someone earning 180k a year only pays 30%
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Old 03.03.2017, 21:25
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Re: Low Cost Broker with no Regular/Custody Fees

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However the marginal rate is not the tax rate, it's the tax rate PLUS social contributions. I suspect it's a bad translation of marginal deductions. Social Contributions will be about 6.5% however this depends on canton.

From the table at 11k the tax rate is 25.9%, this is a huge way from 39%. Someone earning 180k a year only pays 30%
This whole chart was a simplification, but I mentioned that it includes social contributions + quellensteuer. The social contributions in canton Zurich are about 13-14%. I don't think it's completely wrong if you count them as tax. This is in fact the money that goes away. Only some of it goes to your pension. In some countries the social contributions are deducted from income tax. For the full picture, it would also make sense to include healthcare cost as tax.

Also, if I'm not mistaken, when you work as a freelancer and purchase something for your work: laptop, ticket, hotel, and put it as a cost, you will be able to deduct the social contributions and the income tax. So buying a 1000 CHF company laptop, you will save 400 CHF by showing lower income.
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Old 03.03.2017, 21:30
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Re: Low Cost Broker with no Regular/Custody Fees

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However the marginal rate is not the tax rate, it's the tax rate PLUS social contributions. I suspect it's a bad translation of marginal deductions. Social Contributions will be about 6.5% however this depends on canton.

From the table at 11k the tax rate is 25.9%, this is a huge way from 39%. Someone earning 180k a year only pays 30%
I am afraid the table is correct. The "tax rate" is the AVG tax rate, while the marginal tax rate is the increase in taxes if you earned 1000 more.
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  #120  
Old 03.03.2017, 22:33
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Re: Low Cost Broker with no Regular/Custody Fees

Here's how income tax progression looks in Zurich. Assumptions: single, no church, no kids, no wife and no wealth (for simplicity); income is net, i.e. after deductions. This is the normal ordinary income tax, the kind of tax you'd pay if you were swiss, or on a C permit. And also as a taxed-at-source high earner, earning >120k gross - in this case whatever tax-at-source you have paid is considered merely a prepayment towards these ordinary taxes, you'll get a bill for or a refund of the difference eventually.

If you're low earner and taxed-at-source like Meadow, situation however is different: tax at source + possible corrections to it is your final tax liability. Tax-at-source rates are applied to your gross income every month. They're tabulated by each canton to approximate ordinary taxes with a typical set of deductions and average municipal tax rate across the canton. You can ask for corrections for things like pillar 3 payments, that are not part of those "typical" deductions.

Dividends are not taxed at source, they're totally outside of that system. You're free to pocket whatever's left after withholding taxes and whatever portion of them you can reclaim from abroad. But if you're start having way too much of such non-taxed-at-source income, the tax office can get in touch with you about that and send some more bills. The threshold in ZH is 2500 Fr/year.

Social security (AHV) is not technically a tax. It's charged just on your employment income, but not on dividends or rental income. So no need to consider it for tax planning of stock trades.
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Last edited by ivank; 03.03.2017 at 23:00.
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