Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation  
Reply
 
Thread Tools Display Modes
  #1  
Old 10.05.2016, 10:25
defcon3's Avatar
Forum Veteran
 
Join Date: Jul 2008
Location: Geneva
Posts: 515
Groaned at 2 Times in 2 Posts
Thanked 405 Times in 152 Posts
defcon3 has an excellent reputationdefcon3 has an excellent reputationdefcon3 has an excellent reputationdefcon3 has an excellent reputation
SMI* ETF without Distribution

Dear fellow members,

A while back I invested in the iShares SMI etf but each time they pay out dividend and my bank automatically eats 35% witholding tax, I cringe. A reflex, more than anything else but it sent me searching - so far, to no avail.

Would any of you be able to point me to an ETF that is following either SMI, SMIM or SMI Extended and is accumulating?

Thanks
Reply With Quote
  #2  
Old 10.05.2016, 10:57
The_Love_Doctor's Avatar
Forum Legend
 
Join Date: Aug 2009
Location: Zugerberg, Zug
Posts: 3,223
Groaned at 71 Times in 55 Posts
Thanked 3,603 Times in 1,701 Posts
The_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond repute
Re: SMI* ETF without Distribution

Just because the ETF is accumulating it doesn't mean that there is no withholding tax being deducted when the components pay a dividend. The fund would either have to re-invest the dividends net of the tax or gross and then pay the tax separately. So the question is do you want an income or do you want growth?

I could only find one SMI ETF which re-invest dividends: db x-trackers SMI (LU0943504760)

You might find this page helpful. (although only in German but the facts are in numbers so should be easy to compare).

Page: https://www.justetf.com/ch/how-to/smi-etfs.html
Reply With Quote
This user would like to thank The_Love_Doctor for this useful post:
  #3  
Old 10.05.2016, 21:11
defcon3's Avatar
Forum Veteran
 
Join Date: Jul 2008
Location: Geneva
Posts: 515
Groaned at 2 Times in 2 Posts
Thanked 405 Times in 152 Posts
defcon3 has an excellent reputationdefcon3 has an excellent reputationdefcon3 has an excellent reputationdefcon3 has an excellent reputation
Re: SMI* ETF without Distribution

Thank you, Doc!

The layman in me is curious how witholding tax works in the long run in the two type of funds - dist / acc? My understanding is that with the distribution funds, upon distribution one would pay 35% WT but then upon final sale of fund shares will be exempt from further taxation as WT has been applied? Inversely, in the accumulation funds where no gains are taxed while holding, upon final sale the profits are taxed bulk (in their totality) with 35% of the difference between final sale and purchase cost?

Thank you to whoever steps in and enlightens the rookie investor.
Reply With Quote
  #4  
Old 10.05.2016, 21:16
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 18,060
Groaned at 290 Times in 239 Posts
Thanked 15,619 Times in 8,692 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: SMI* ETF without Distribution

Quote:
View Post
Thank you, Doc!

The layman in me is curious how witholding tax works in the long run in the two type of funds - dist / acc? My understanding is that with the distribution funds, upon distribution one would pay 35% WT but then upon final sale of fund shares will be exempt from further taxation as WT has been applied? Inversely, in the accumulation funds where no gains are taxed while holding, upon final sale the profits are taxed bulk (in their totality) with 35% of the difference between final sale and purchase cost?

Thank you to whoever steps in and enlightens the rookie investor.
The tax liability will be on just the income in both cases, the tax should be virtually identical.
Reply With Quote
This user would like to thank fatmanfilms for this useful post:
  #5  
Old 10.05.2016, 22:57
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 13,397
Groaned at 269 Times in 175 Posts
Thanked 15,848 Times in 6,725 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: SMI* ETF without Distribution

if you're paying an amount in every month anyway, why not just take the dividends and increase the monthly amount by the expected dividend?
Reply With Quote
The following 2 users would like to thank Phil_MCR for this useful post:
  #6  
Old 10.05.2016, 23:08
defcon3's Avatar
Forum Veteran
 
Join Date: Jul 2008
Location: Geneva
Posts: 515
Groaned at 2 Times in 2 Posts
Thanked 405 Times in 152 Posts
defcon3 has an excellent reputationdefcon3 has an excellent reputationdefcon3 has an excellent reputationdefcon3 has an excellent reputation
Re: SMI* ETF without Distribution

Thank you, FMF. Basically, nothing to obsess about for as long as I am diligent (or disciplined or perhaps both) to not spend the proceeds but re-invest them, I will still enjoy compound growth. *phew*

EDIT > Phil beat me to it, only to validate the direction I have picked. Cheers to both for the help!

Last edited by defcon3; 10.05.2016 at 23:10. Reason: post while I was typing
Reply With Quote
  #7  
Old 11.05.2016, 09:04
Forum Veteran
 
Join Date: Mar 2010
Location: Greater Zürich Area
Posts: 838
Groaned at 112 Times in 70 Posts
Thanked 619 Times in 348 Posts
EPMike has earned the respect of manyEPMike has earned the respect of manyEPMike has earned the respect of many
Re: SMI* ETF without Distribution

Quote:
View Post
The tax liability will be on just the income in both cases, the tax should be virtually identical.


I thought there is no capital gains tax in Switzerland?
Reply With Quote
  #8  
Old 11.05.2016, 09:07
22 yards's Avatar
Only in moderation
 
Join Date: Jul 2009
Location: Basel-Land
Posts: 8,445
Groaned at 247 Times in 200 Posts
Thanked 15,839 Times in 6,548 Posts
22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute
Re: SMI* ETF without Distribution

Quote:
View Post


I thought there is no capital gains tax in Switzerland?
On most capital gains, yes, that's correct (gain on real estate is an obvious exception). But dividends aren't capital gain, they're income and are taxed accordingly. Don't forget that the 35% is withholding tax, i.e. a provision against the correct amount of tax payable, which is sorted out in your tax return if you submit one -- so there could be a refund coming in a year or more.
Reply With Quote
  #9  
Old 11.05.2016, 09:17
Forum Veteran
 
Join Date: Mar 2010
Location: Greater Zürich Area
Posts: 838
Groaned at 112 Times in 70 Posts
Thanked 619 Times in 348 Posts
EPMike has earned the respect of manyEPMike has earned the respect of manyEPMike has earned the respect of many
Re: SMI* ETF without Distribution

Quote:
View Post
On most capital gains, yes, that's correct (gain on real estate is an obvious exception). But dividends aren't capital gain, they're income and are taxed accordingly. Don't forget that the 35% is withholding tax, i.e. a provision against the correct amount of tax payable, which is sorted out in your tax return if you submit one -- so there could be a refund coming in a year or more.
How about if you invest in accumulating ETFs which reinvest dividends? Does that mean that you still need to pay tax on those dividends even if they are reinvested?
Reply With Quote
  #10  
Old 11.05.2016, 09:43
robBob's Avatar
Forum Veteran
 
Join Date: Mar 2012
Location: Zurich
Posts: 1,979
Groaned at 39 Times in 26 Posts
Thanked 1,589 Times in 910 Posts
robBob has a reputation beyond reputerobBob has a reputation beyond reputerobBob has a reputation beyond reputerobBob has a reputation beyond repute
Re: SMI* ETF without Distribution

The 35% withholding gets paid back to you after reporting your tax. You don't loose it!
Reply With Quote
  #11  
Old 11.05.2016, 09:55
Banned
 
Join Date: Feb 2010
Location: Zurich
Posts: 244
Groaned at 63 Times in 27 Posts
Thanked 121 Times in 68 Posts
MarkH is considered unworthyMarkH is considered unworthyMarkH is considered unworthyMarkH is considered unworthy
Re: SMI* ETF without Distribution

https://www.postfinance.ch/binp/post...axvalue_en.pdf

This document explains how the taxes work for funds.
Reply With Quote
  #12  
Old 11.05.2016, 10:21
The_Love_Doctor's Avatar
Forum Legend
 
Join Date: Aug 2009
Location: Zugerberg, Zug
Posts: 3,223
Groaned at 71 Times in 55 Posts
Thanked 3,603 Times in 1,701 Posts
The_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond repute
Re: SMI* ETF without Distribution

Quote:
View Post
Thank you, FMF. Basically, nothing to obsess about for as long as I am diligent (or disciplined or perhaps both) to not spend the proceeds but re-invest them, I will still enjoy compound growth. *phew*

EDIT > Phil beat me to it, only to validate the direction I have picked. Cheers to both for the help!
If you plan to re-invest the dividends anyway then -cetris paribus- the accumulating ETF is what you should be aiming for as the fund manager (in theory) is able to re-invest the dividends more efficiently than you would.
You'd have to check that all the other things are more or less the same. (Things like TER, tracking, liquidity and spread.)

A lot of the ETF issuers have both kinds (acc + dist) for given benchmarks that they track.
Reply With Quote
  #13  
Old 11.05.2016, 10:22
Forum Veteran
 
Join Date: Mar 2010
Location: Greater Zürich Area
Posts: 838
Groaned at 112 Times in 70 Posts
Thanked 619 Times in 348 Posts
EPMike has earned the respect of manyEPMike has earned the respect of manyEPMike has earned the respect of many
Re: SMI* ETF without Distribution

Quote:
View Post
https://www.postfinance.ch/binp/post...axvalue_en.pdf

This document explains how the taxes work for funds.
Sorry but I still do not get it. An accumulating fund does not have earnings, only capital gain, right? So what do you pay taxes on?
Reply With Quote
  #14  
Old 11.05.2016, 10:47
Banned
 
Join Date: Feb 2010
Location: Zurich
Posts: 244
Groaned at 63 Times in 27 Posts
Thanked 121 Times in 68 Posts
MarkH is considered unworthyMarkH is considered unworthyMarkH is considered unworthyMarkH is considered unworthy
Re: SMI* ETF without Distribution

Quote:
View Post
Sorry but I still do not get it. An accumulating fund does not have earnings, only capital gain, right? So what do you pay taxes on?
For an accumulating fund (A)
In the case of an accumulating fund, the income is not paid out but is instead reinvested in the fund. This income is also liable
to tax, providing the funds were held in your custody account on the cut-off date for year-end accounting. For this calculation,
the number of fund units held on the distribution date is authoritative:
Number of units × gross earnings = total gross earnings (declare in tax return)
Reply With Quote
  #15  
Old 11.05.2016, 10:48
The_Love_Doctor's Avatar
Forum Legend
 
Join Date: Aug 2009
Location: Zugerberg, Zug
Posts: 3,223
Groaned at 71 Times in 55 Posts
Thanked 3,603 Times in 1,701 Posts
The_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond reputeThe_Love_Doctor has a reputation beyond repute
Re: SMI* ETF without Distribution

Quote:
View Post
Sorry but I still do not get it. An accumulating fund does not have earnings, only capital gain, right? So what do you pay taxes on?
The components dividends are added up and considered income. It doesn't matter if they are paid to the fund and the fund re-invests them, or if they are paid to you and you re-invest them.

Simply put you can not turn an income from the individual components of the ETF into capital gains by simply wrapping them up into a basket and selling them as an ETF.
Reply With Quote
The following 3 users would like to thank The_Love_Doctor for this useful post:
  #16  
Old 11.05.2016, 12:05
22 yards's Avatar
Only in moderation
 
Join Date: Jul 2009
Location: Basel-Land
Posts: 8,445
Groaned at 247 Times in 200 Posts
Thanked 15,839 Times in 6,548 Posts
22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute22 yards has a reputation beyond repute
Re: SMI* ETF without Distribution

Quote:
View Post
For an accumulating fund (A)
In the case of an accumulating fund, the income is not paid out but is instead reinvested in the fund. This income is also liable
to tax, providing the funds were held in your custody account on the cut-off date for year-end accounting. For this calculation,
the number of fund units held on the distribution date is authoritative:
Number of units × gross earnings = total gross earnings (declare in tax return)
I think you're confusing wealth tax (for which the account balance at year-end comes into play) and income tax (which applies to all income, whether saved or not at year-end). See the post above. ^^
Reply With Quote
  #17  
Old 11.05.2016, 13:45
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 13,397
Groaned at 269 Times in 175 Posts
Thanked 15,848 Times in 6,725 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: SMI* ETF without Distribution

And how have we got so many posts without fmf mentioning fundsmith?
Reply With Quote
This user would like to thank Phil_MCR for this useful post:
  #18  
Old 11.05.2016, 14:08
Banned
 
Join Date: Feb 2010
Location: Zurich
Posts: 244
Groaned at 63 Times in 27 Posts
Thanked 121 Times in 68 Posts
MarkH is considered unworthyMarkH is considered unworthyMarkH is considered unworthyMarkH is considered unworthy
Re: SMI* ETF without Distribution

Quote:
View Post
I think you're confusing wealth tax (for which the account balance at year-end comes into play) and income tax (which applies to all income, whether saved or not at year-end). See the post above. ^^
I am not confusing anything.My post is a direct extract from the Postfinance
Tax document.
Reply With Quote
  #19  
Old 11.05.2016, 14:11
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 18,060
Groaned at 290 Times in 239 Posts
Thanked 15,619 Times in 8,692 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: SMI* ETF without Distribution

Quote:
View Post
I think you're confusing wealth tax (for which the account balance at year-end comes into play) and income tax (which applies to all income, whether saved or not at year-end). See the post above. ^^
I think you misread what MarkH wrote 'Number of units × gross earnings = total gross earnings (declare in tax return)' Which is of course correct.

Wealth tax figure of no. of units x bid value should also be declared.
Reply With Quote
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Singapore - Trading + Funds/ETF jvia Finance/banking/taxation 0 29.10.2012 12:04
Smi? Info Finance/banking/taxation 30 10.08.2011 17:32
Any ETF specialists on board? Uncle GroOve Finance/banking/taxation 23 12.10.2010 20:14
Zurich trading accounts (ETF's and Bullion) jamie11 Finance/banking/taxation 2 18.05.2009 22:11
SMI - Volatility Info Finance/banking/taxation 58 19.02.2008 09:08


All times are GMT +2. The time now is 15:45.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2019, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0