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Old 29.10.2017, 19:55
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Tax on equity earnings

Hello guys,
Can some of you please guide me with taxes on profits from equity. If I am holding shares for more than one year or even three years will I still have to pay taxes?

Asking as in several countries there are no taxes on long term gains from equity.

Thanks for your answers
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  #2  
Old 29.10.2017, 20:47
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Re: Tax on equity earnings

At the link below under "6.0 Taxes on individuals", Deloitte writes:

"Capital gains on nonbusiness movable and immovable property are exempt from tax at the federal level. Capital gains on nonbusiness movable property also are exempt at the cantonal/communal levels, but gains on the sale of real estate may be subject to tax by both the canton and the commune where the real estate is located."

https://www2.deloitte.com/content/da...guide-2015.pdf
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Old 29.10.2017, 22:35
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Re: Tax on equity earnings

The value of your share holding on 31st December of each year is the figure used to calculate your liability to wealth tax for that year.

Any dividend income is taxed as part of your income tax.
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Old 30.10.2017, 09:38
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Re: Tax on equity earnings

Thanks a lot. BUt what happen when I sell my shares (for example after two years with profit of 30%).

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The value of your share holding on 31st December of each year is the figure used to calculate your liability to wealth tax for that year.

Any dividend income is taxed as part of your income tax.
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Old 30.10.2017, 10:16
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Re: Tax on equity earnings

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Thanks a lot. BUt what happen when I sell my shares (for example after two years with profit of 30%).
Read post #2 above. It would be a capital gain...
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Old 30.10.2017, 10:26
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Re: Tax on equity earnings

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Thanks a lot. BUt what happen when I sell my shares (for example after two years with profit of 30%).
The net proceeds are booked into your cash account

Or to rephrase: Nothing (usually).

With the caveat that if your annual gains make up more than 50% of your taxable income in any given calendar year, or if you satisfy certain other criteria, your gains may (probably will) become subject to ordinary income tax, in which case it's taxed at your marginal income tax rate, plus an additional 10.25% are due to AHV/IV/EO (mandatory social security) - the total bite can easily be 40% of the additional income or more.
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Old 30.10.2017, 10:44
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Re: Tax on equity earnings

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Thanks a lot. BUt what happen when I sell my shares (for example after two years with profit of 30%).
If you're not in the scenario Urs Max outlines (where you are categorised as a professional trader, so trading is effectively your job), nothing. You should note that Urs Max's link at the bottom says "Many investors meet one or more of these criteria. However, in practice only a few are categorized as professional securities traders."

You are taxed, for wealth tax purposes on the total value of the holding. That is all. When you sell you convert it to cash, and that continues to count toward your wealth tax liability. If you make 30% profit on a 10000CHF holding, overall your wealth is 3000CHF more - whether in cash (if you sell) or stocks (if you don't).

Mulhollander's quote and links says there is no capital gains tax except on real estate.
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Old 30.10.2017, 10:56
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Re: Tax on equity earnings

Thank you guys, really helpful. So all counted in wealth tax and dividend are taxed (I know it personally [circa 35%]). And finally what I really wanted to know is no tax on earning after sale of shares.

Have a good week ahead.
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Old 30.10.2017, 11:04
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Re: Tax on equity earnings

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Thank you guys, really helpful. So all counted in wealth tax and dividend are taxed (I know it personally [circa 35%]). And finally what I really wanted to know is no tax on earning after sale of shares.

Have a good week ahead.
Are you trying to be annoying you have been told multiple times.

NO CGT ON THE SALE OF SHARES IN NORMAL CIRCUMSTANCES
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Old 30.10.2017, 11:10
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Re: Tax on equity earnings

I think you are annoying ...what is your problem, I am just summing up the info (no further questions), so the next member looking for similar information may not need to read the thread in full.

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Are you trying to be annoying you have been told multiple times.

NO CGT ON THE SALE OF SHARES IN NORMAL CIRCUMSTANCES
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Old 30.10.2017, 11:11
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Re: Tax on equity earnings

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And finally what I really wanted to know is no tax on earning after sale of shares.

Have a good week ahead.
There might be tax on the sale of share if it is considered "commercial trading".
See Federal Tax Administartion Circular No. 36 (Kreisschreiben Nr. 36 Gewerbsmässiger Wertschriftenhandel https://www.estv.admin.ch/estv/de/ho...schreiben.html)

It is NOT commercial trading if all of the follwing are fullfilled:
Quote:
In any case, the tax authorities assume private asset management / tax-exempt private capital gains if the following criteria are met cumulatively:

1. The holding period of the securities sold is at least 6 months.

2. The transaction volume (corresponding to the sum of all purchase prices and sales proceeds) per calendar year does not exceed a total of five times the securities and credit balance at the beginning of the tax period.

3. capital gains from securities transactions do not constitute a necessity to replace missing or missing income for the purpose of living. This is usually the case when realized capital gains amount to less than 50% of net income in the tax period.

4. The investments are not externally financed or the taxable income from securities (such as interest, dividends, etc.) is not greater than the pro rata interest on debt.

5. The purchase and sale of derivatives (especially options) is limited to hedging own securities positions.

If these criteria are not met cumulatively, commercial securities trading cannot be ruled out. The corresponding assessment is based on all circumstances of the specific individual case.
Automtic translation using deepl.com
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Old 30.10.2017, 11:16
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Re: Tax on equity earnings

Are dividend taxed atcirca 35% or is the sum of dividends just added to my income?
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Old 30.10.2017, 11:23
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Re: Tax on equity earnings

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Are dividend taxed atcirca 35% or is the sum of dividends just added to my income?
Added to your taxable income. Marginal tax rate you'd be paying on them can actually exceed 35%, with a good enough salary.

35% is just withholding tax and only on swiss domiciled securities, you get it refunded eventually or credited towards final tax bill. On US stocks it's 15% (30% with a swiss broker), IE securities should normally even have 0% withholding (but make sure to check out how much your fund has itself coughed up to foreign taxation)
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Old 30.10.2017, 12:19
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Re: Tax on equity earnings

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If you're not in the scenario Urs Max outlines (where you are categorised as a professional trader, so trading is effectively your job), nothing. You should note that Urs Max's link at the bottom says "Many investors meet one or more of these criteria. However, in practice only a few are categorized as professional securities traders."

You are taxed, for wealth tax purposes on the total value of the holding. That is all. When you sell you convert it to cash, and that continues to count toward your wealth tax liability. If you make 30% profit on a 10000CHF holding, overall your wealth is 3000CHF more - whether in cash (if you sell) or stocks (if you don't).

Mulhollander's quote and links says there is no capital gains tax except on real estate.
But say if you retire early and live off your investments? Does anyone know of anyone being categorized as professional traders when living off capital gains in retirement. I mean at least until reaching regular retirement age, not 50% but 100% of income would come from capital gains and you would depend on your capital gains financially. So you would surely meet 2 of the criteria.
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Old 30.10.2017, 12:43
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Re: Tax on equity earnings

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But say if you retire early and live off your investments? Does anyone know of anyone being categorized as professional traders when living off capital gains in retirement. I mean at least until reaching regular retirement age, not 50% but 100% of income would come from capital gains and you would depend on your capital gains financially. So you would surely meet 2 of the criteria.
By selling off and liquidating your portfolio acquired over the last years? I do not think it will be considered as professional trading but is still considered private wealth management.

Another, actually more important part is if the capital gain comes from the sale of personal assets (tax free, Art. 16 Abs. 3 DBG) or business assets (taxable Art. 18 DBG https://www.admin.ch/opc/de/classifi...329/index.html).

I do not see how you could reasonably argue that by liquidating a private portfolio it becomes suddenly the asset of a business.
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Old 30.10.2017, 13:01
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Re: Tax on equity earnings

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Thank you guys, really helpful. So all counted in wealth tax and dividend are taxed (I know it personally [circa 35%]). And finally what I really wanted to know is no tax on earning after sale of shares.

Have a good week ahead.
The 35% withholding tax is reclaimed on tax returns. “Earning after sale of shares” is better described as capital gains...
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Old 30.10.2017, 13:01
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Re: Tax on equity earnings

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By selling off and liquidating your portfolio acquired over the last years? I do not think it will be considered as professional trading but is still considered private wealth management.

Another, actually more important part is if the capital gain comes from the sale of personal assets (tax free, Art. 16 Abs. 3 DBG) or business assets (taxable Art. 18 DBG https://www.admin.ch/opc/de/classifi...329/index.html).

I do not see how you could reasonably argue that by liquidating a private portfolio it becomes suddenly the asset of a business.
Well, gradually selling personal assets off.
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Old 30.10.2017, 13:02
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Re: Tax on equity earnings

Dividends will be taxed at source first, and it is added to your annual income. Then the amount collected as tax will be added to the total tax paid for the year and can be adjusted against your total income/wealth while filing your income tax.

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Are dividend taxed atcirca 35% or is the sum of dividends just added to my income?
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Old 30.10.2017, 16:13
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Re: Tax on equity earnings

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But say if you retire early and live off your investments? Does anyone know of anyone being categorized as professional traders when living off capital gains in retirement. I mean at least until reaching regular retirement age, not 50% but 100% of income would come from capital gains and you would depend on your capital gains financially. So you would surely meet 2 of the criteria.
From a taxation POV you won't be taking gains but simply liquidating your portfolio, be that over time or in one fell swoop. Additonal capital gains during that time, if any, will be considered along the criteria mentioned above.
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Old 30.10.2017, 16:36
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Re: Tax on equity earnings

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But say if you retire early and live off your investments? Does anyone know of anyone being categorized as professional traders when living off capital gains in retirement. I mean at least until reaching regular retirement age, not 50% but 100% of income would come from capital gains and you would depend on your capital gains financially. So you would surely meet 2 of the criteria.
I can't answer that question. However, if you retire before 65 (women: 64), you'll still need to pay into AHV until retirement. If your income is solely from investment income, your AHV obligatory contributions may be based on your assets. Depending on your assets, this can result in annual AHV contributions of up to a maximum of CHF 23'900 per year (on assets of CHF 8.4 million).

See the table at p. 6 to determine the amount of AHV contributions that would be required (English):

https://www.ahv-iv.ch/p/2.03.e
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