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  #21  
Old 11.11.2016, 16:03
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Re: Interactive Brokers account

That's why I put it in quotes. Its the hidden tax that I've mentioned before.

Verrechnungssteuer (withholding tax, VSt) is only for swiss securities. For foreign withholding tax use da-1 or something.
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  #22  
Old 11.11.2016, 16:27
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Re: Interactive Brokers account

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That's why I put it in quotes. Its the hidden tax that I've mentioned before.

Verrechnungssteuer (withholding tax, VSt) is only for swiss securities. For foreign withholding tax use da-1 or something.

Could you tell me more? What is DA-1 form? If my ETF is domiciled in Ireland, will there be any withholding tax on dividends there? Does it mean I will not receive the total dividend, as displayed on this screenshot?


I guess there is no withholding tax on the domicile country of the single stock? The S&P 500 is easy, only US, but an all-world ETF has stocks from 40 countries.
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Old 11.11.2016, 16:27
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Re: Interactive Brokers account

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Are there actually any examples where this works and there is no tax?
The tax is on dividends, they're always taxable in Switzerland in principle. Accumulating funds make them complicated to tax due to their nontransparent holding structure, so they have currently this scheme with fictional taxable income popping up at random dates. If you hold a security on such a date from Kursliste, rest assured you'll get taxed. If you carefully rebalance your portfolio throughout the year to avoid such dates, then I don't know for sure, but that may prompt them to take a closer look at your activities and maybe make a personalized judgement just for you.

Beware that capital gains aren't always tax free. You must stick to certain rules, such as holding a security for at least 6 months until selling, or you risk being labeled a professional trader and have to pay income tax (easily 30-40%) + AHV (another 5%) on your capital gains for the year.

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Could you tell me more? What is DA-1 form? If my ETF is domiciled in Ireland, will there be any withholding tax on dividends there? Does it mean I will not receive the total dividend, as displayed on this screenshot?
Yes, everyone is withholding taxes from dividends pretty much everywhere in the world. You can only claim back swiss withholding tax for swiss domiciled securities in the easy way. For foreign withholding tax file DA-1 form if you want it back, but you might not be able to get it all back in some cases, e.g. 15% is usually irrecoverably lost to US for US securities.
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Old 11.11.2016, 16:49
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Re: Interactive Brokers account

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What is DA-1 form?
Formular DA-1 (Natürliche Personen)
Für dem Steuerrückbehalt USA unterliegende Wertschriften und/oder mit einer Quellensteuer belastete
Erträge von Titeln aus folgenden Ländern (Stand 1.1.2015):
Ägypten (EG), Albanien (AL), Algerien (DZ), Argentinien (AR), Armenien (AM), Aserbaidschan (AZ),
Australien (AU), Bangladesch (BD), Belarus (BY), Belgien (BE), Bulgarien (BG), Chile (CL), China (CN),
Chinesisches Taipei (TW), Dänemark (DK), Deutschland (DE), Ecuador (EC), Elfenbeinküste (CI), Estland
(EE), Finnland (FI), Frankreich (FR), Georgien (GE), Ghana (GH), Griechenland (GR), Hongkong (HK),
Indien (IN), Indonesien (ID), Iran (IR), Irland (IE), Island (IS), Israel (IL), Italien (IT), Jamaika (JM), Japan
(JP), Kanada (CA), Kasachstan (KZ), Katar (QA), Kirgisistan (KG), Kolumbien (CO), Kroatien (HR), Kuwait
(KW), Lettland (LV), Litauen (LT), Luxemburg (LU), Malaysia (MY), Malta (MT), Marokko (MA), Mazedonien
(MK), Mexico (MX), Moldova (MD), Mongolei (MN), Montenegro (ME), Neuseeland (NZ), Niederlande
(NL), Norwegen (NO), Österreich (AT), Pakistan (PK), Peru (PE), Philippinen (PH), Polen (PL), Portugal
(PT), Rumänien (RO), Russland (RU), Schweden (SE), Serbien (RS), Singapur (SG), Slowakei (SK), Slowenien
(SI), Spanien (ES), Sri Lanka (LK), Südafrika (ZA), Süd-Korea (KR), Tadschikistan (TJ), Thailand
(TH), Trinidad und Tobago (TT), Tschechische Republik (CZ), Tunesien (TN), Türkei (TR), Turkmenistan
(TM), Ukraine (UA), Ungarn (HU), Uruguay (UY), Usbekistan (UZ), Venezuela (VE), Vereinigte Arabische
Emirate (AE), Vereinigte Staaten von Amerika (US) sowie Vietnam (VN).


If your security's country is on the list above, you can claim the taxes they withheld from your dividends with DA-1 back.
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  #25  
Old 11.11.2016, 16:50
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Re: Interactive Brokers account

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Beware that capital gains aren't always tax free. You must stick to certain rules, such as holding a security for at least 6 months until selling, or you risk being labeled a professional trader and have to pay 30-40% income tax + AHV on all your capital gains in the year.
Yes, this I am aware of. This page is a good reference:

http://www.moneyland.ch/en/stock-mar...ofits-tax-free

Since I am going to be a very passive stockholder, the only potential Problem for me is Point 3:

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3. You do not depend on the profits from trading your securities in order to finance your household expenses. Rule of thumb: the profits from trading should make up less than 50% of your total net income during one tax period.
Since my plan is early retirement, what happens if in 10 years I am no longer working and the dividends keep coming in. Plus I'm selling some stock to finance my living. Will the tax authority start charging me with capital gains tax? And from which period? Hopefully not since the very beginning, just since the start of year when I stopped working?

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Yes, everyone is withholding taxes from dividends pretty much everywhere in the world. You can only claim swiss withholding tax back in the easy way, for foreign withholding tax file DA-1 form. You may not get all the tax back in some cases, e.g. 15% is lost to US.
If an Irish ETF holds American stocks, does the USA levy withholding tax too? So does the ETF take care of reclaiming that tax itself? I cannot imagine how it would work if you were to do it yourself.

Let's say an ETF pays 2 CHF dividend and Ireland has WTAX of 15%. Does it mean I will receive 1.70 CHF on my Broker account?

I checked the DA-1 form. It doesn't look too scary. So how does it work - I file this form to the Swiss authorities and they give me back the money, that Ireland took away? Do they go and say: hey Ireland, this guy pays taxes by us, give us back the tax he paid?
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  #26  
Old 11.11.2016, 17:55
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Re: Interactive Brokers account

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Since my plan is early retirement, what happens if in 10 years I am no longer working and the dividends keep coming in. Plus I'm selling some stock to finance my living. Will the tax authority start charging me with capital gains tax?
If you don't have any other income to declare (pension, husband's salary, unemployment benefits, etc) and live solely off your stocks, then I suppose it's indeed a real possibility that they'll tax you as a trader. I have no experience with that situation though, so cannot advise.

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If an Irish ETF holds American stocks, does the USA levy withholding tax too?
I'd presume that normally the american tax would be withheld when dividends are first paid to the Irish fund and the fund's lawyers will take appropriate steps to claim as much as possible of it back. They should then distribute the leftovers to you and charge Irish withholding tax on that.

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I checked the DA-1 form. It doesn't look too scary. So how does it work - I file this form to the Swiss authorities and they give me back the money, that Ireland took away? Do they go and say: hey Ireland, this guy pays taxes by us, give us back the tax he paid?
You file the form and they take care of extracting the money from corresponding government. If they succeed, whatever they got for you is credited towards the payment of your swiss taxes or will be refunded, there's a field where you can leave your bank account number for refunds.
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  #27  
Old 11.11.2016, 18:41
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Re: Interactive Brokers account

Also note that DA-1 can be sent independently from your tax declaration. So it may make some sense to send it earlier, so that they'll procure the money earlier and you'd pay less interest in the end on underpaid swiss taxes, or earn more on overpaid taxes. On the other hand with current interest rates it may not be worth the hassle though.
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  #28  
Old 11.11.2016, 19:13
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Re: Interactive Brokers account

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Also note that DA-1 can be sent independently from your tax declaration. So it may make some sense to send it earlier, so that they'll procure the money earlier and you'd pay less interest in the end on underpaid swiss taxes, or earn more on overpaid taxes. On the other hand with current interest rates it may not be worth the hassle though.
I always had a refund within 6 weeks of sending it in, tax return on the other hand takes 9 - 18 months to sort out,
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  #29  
Old 16.11.2016, 17:48
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Re: Interactive Brokers account

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If you don't have any other income to declare (pension, husband's salary, unemployment benefits, etc) and live solely off your stocks, then I suppose it's indeed a real possibility that they'll tax you as a trader. I have no experience with that situation though, so cannot advise.
I just thought of a follow-up question regarding this rule:

"You do not depend on the profits from trading your securities in order to finance your household expenses. The profits from trading should make up less than 50% of your total net income during one tax period."

Would dividend be regarded as profit from trading? I think not, since dividend is not trading. So if I only lived off my dividend and never sold any stocks, I should not be taxed for capital gains, correct?

Following that logic, I should be even allowed to sell some stock, just not more than my dividend income in that year. What do you think?
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  #30  
Old 16.11.2016, 18:22
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Re: Interactive Brokers account

I think capital gains are tax free in CH as long as these are only part of your income and you work full time.
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  #31  
Old 16.11.2016, 18:23
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Re: Interactive Brokers account

English is not an official language in Switzerland, something will be lost in translation like in this case, which is why you should always check the sources:

"Das Erzielen von Kapitalgewinnen aus Wertschriftengeschäften bildet keine Notwendigkeit, um fehlende oder wegfallende Einkünfte zur Lebenshaltung zu ersetzen. Das ist regelmässig dann der Fall, wenn die realisierten Kapitalgewinne weniger als 50% des Reineinkommens in der Steuerperiode betragen."

You're good as long as realized capital gains are less than 50% of your net income.
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  #32  
Old 16.11.2016, 18:40
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Re: Interactive Brokers account

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I think capital gains are tax free in CH as long as these are only part of your income and you work full time.
Wrong

The conditions under which you are guaranteed to not be taxed for capital gains are pretty clearly, formally defined and are quite restrictive. Please don't spread your misinformed beliefs further.

If you violate the rules, it's by far not a certainty yet that you will get taxed, but you're leaving yourself vulnerable and the stakes can be very high. Especially if you have a good paying full time job and so are taxed at the highest rates - then you might easily have to cough up half of your capital gains or so in taxes.

Last edited by ivank; 16.11.2016 at 19:25. Reason: elaborate
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  #33  
Old 16.11.2016, 21:04
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Re: Interactive Brokers account

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English is not an official language in Switzerland, something will be lost in translation like in this case, which is why you should always check the sources:

You're good as long as realized capital gains are less than 50% of your net income.
Wow, thanks for that link. I wouldn't know where to look for it. But to clarify, what are "realized capital gains"? Do dividends qualify as such, or not? If I only lived off my dividends and didn't do any trading, would my capital gains be taxed?
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Old 16.11.2016, 21:33
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Re: Interactive Brokers account

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Wrong

The conditions under which you are guaranteed to not be taxed for capital gains are pretty clearly, formally defined and are quite restrictive. Please don't spread your misinformed beliefs further.

If you violate the rules, it's by far not a certainty yet that you will get taxed, but you're leaving yourself vulnerable and the stakes can be very high. Especially if you have a good paying full time job and so are taxed at the highest rates - then you might easily have to cough up half of your capital gains or so in taxes.


If I am a small investor and I buy 5000 CHF worth of stock and after one month stock doubles and I sell for 10000 CHF, will the tax office bother to tax me? Assuming that was my only trade for the year.
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Old 16.11.2016, 22:02
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Re: Interactive Brokers account

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If I am a small investor and I buy 5000 CHF worth of stock and after one month stock doubles and I sell for 10000 CHF, will the tax office bother to tax me? Assuming that was my only trade for the year.
You have it all listed in the 5 points, either in my post or in the link of ivank. If you make a small trade like this and you have another, more significant source of income, then you will not qualify as a trader.
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Old 16.11.2016, 22:46
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Re: Interactive Brokers account

No you must satisfy all conditions to be on the safe side. Especially 6 months buy and hold rule.

Else it's up to the tax office to examine your personal situation and trades and make a judgement. Two small trades most likely won't make you look like a trader, but still it'd better to keep them 6 month apart to avoid the risk.

But 5k investment is like… poverty. Make it more interesting - multiply your numbers by 10 or 100 and ask yourself how'd you like to give half of the profits to the government

Last edited by ivank; 16.11.2016 at 22:57.
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Old 16.11.2016, 23:11
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Re: Interactive Brokers account

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But to clarify, what are "realized capital gains"?
How much you earned on the sale, I.e. difference between sell and buy price. Maybe, I'm not sure, they may consider price of the stock as of beginning of the tax year instead of buy price.

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Do dividends qualify as such, or not?
Dividends aren't capital gains by definition
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  #38  
Old 16.11.2016, 23:16
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Re: Interactive Brokers account

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No you must satisfy all conditions to be on the safe side. Especially 6 months buy and hold rule.
You're right, I forgot about the 6 months rule.

So what do you think about dividends counting as realized capital gains? EDIT: You answered my question when I was writing this post, thanks

And in the event when you do have to pay the tax, do you pay it only on the stock sold in a given tax period, or on held stock as well?
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Old 16.11.2016, 23:25
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Re: Interactive Brokers account

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How much you earned on the sale, I.e. difference between sell and buy price. Maybe, I'm not sure, they may consider price of the stock as of beginning of the tax year instead of buy price.
Now that would suck a lot. Imagine buying some stock now for 100 and in 10 years selling it for 300 (or in 30 years for 1000). If they would count the capital gains from the buy price, and not from the start of the current tax period, then the taxable amount would be really heavy. On the other hand, if they counted from the start of year, then you should always sell at the start of year and then have no capital gains.
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Old 17.11.2016, 00:24
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Re: Interactive Brokers account

Calculating gains just for the current year sounds more logical to me. If you bought a security long enough ago you might not even have nor be required to have any documents about its original price anymore. But I don't know exactly how they would calculate the gain and tax, and hope to never have to find out.
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