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Old 06.03.2018, 01:58
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Short term capital gains taxes in switzerland

Hi Im new to this forum and switzerland.

I trade US stocks and I have short term (same day to a few months) capital gains and losses

I heard that switzerland has no capital gains tax but does that apply to foreign(to them) stocks traded short term?

does that apply only to citizens or residents with b and c permits dont pay that either?

Thanks
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Old 06.03.2018, 09:03
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Re: Short term capital gains taxes in switzerland

Private individuals do not normally pay capital gain taxes on sale of "moveable objects" such as securities in Switzerland to the extent that the trading is not considered a business activity.

The document "Kreisschreiben Nr. 36 Gewerbsmässiger Wertschriftenhandel" lists five "safe haven" tax-free trading rules whereby an individual would not be considered a busines trader. If some of rules are not complied with, classification as a business trader can not be ruled out:

1. The holding period of the sold securities is at least 6 months.
2. The transaction volume (corresponds to the sum of all purchase prices and sales proceeds) per calendar year is no more than five times the amount of the securities and credit balances at the beginning of the tax period.
3. Obtaining capital gains from securities transactions is not a necessity to replace missing or lost income for living. This is usually the case when the realized capital gains amount to less than 50% of the net income in the tax period.
4. The investments are not leveraged or the taxable investment income from the securities (such as interest, dividends, etc.) is greater than the proportionate interest on debt.
5. The purchase and sale of derivatives (especially options) is limited to hedging own securities positions.
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Old 06.03.2018, 09:22
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Re: Short term capital gains taxes in switzerland

Everything Mullhollander has said is correct. Just to add a little:

These 5 items are at the discretion of the person who is evaluating your tax return after you submit it. If their decision goes ' against' you, then you can appeal. The directives might seem a bit woolly/imprecise, but that is really for YOUR benefit, as it allows some discretion for the taxman in their evaluation.

If the 'Business Activity' is triggered, not only is income tax liable but you are also liable for AHV/AVS etc. (state pension i.e. P1 at least, not sure about P2 ) contributions as well.

Last edited by bill_door; 06.03.2018 at 09:27. Reason: spelling
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Old 06.03.2018, 17:03
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Re: Short term capital gains taxes in switzerland

Thank you everybody for your replies

Quote:
Private individuals do not normally pay capital gain taxes on sale of "moveable objects" such as securities in Switzerland to the extent that the trading is not considered a business activity.

The document "Kreisschreiben Nr. 36 Gewerbsmässiger Wertschriftenhandel" lists five "safe haven" tax-free trading rules whereby an individual would not be considered a busines trader. If some of rules are not complied with, classification as a business trader can not be ruled out:

1. The holding period of the sold securities is at least 6 months.
2. The transaction volume (corresponds to the sum of all purchase prices and sales proceeds) per calendar year is no more than five times the amount of the securities and credit balances at the beginning of the tax period.
3. Obtaining capital gains from securities transactions is not a necessity to replace missing or lost income for living. This is usually the case when the realized capital gains amount to less than 50% of the net income in the tax period.
4. The investments are not leveraged or the taxable investment income from the securities (such as interest, dividends, etc.) is greater than the proportionate interest on debt.
5. The purchase and sale of derivatives (especially options) is limited to hedging own securities positions.
I dont meet number 1, 5 and I think 2 as well so its not looking good

Quote:
You indicate you are resident in the USA. So isn't it irrelevant what the Swiss tax system is (except for withholding tax) as you pay your taxes to Uncle Sam??
It could be worth it to change that although its not easy. Im also a citizen of one of the EU27 countries
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Old 07.12.2018, 23:14
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Re: Short term capital gains taxes in switzerland

I don't want to open a new topic so here is the question...

The rules to avoid being classified as a professional look pretty extreme. Anything more than "buy and hold for many years" could be problematic. However, I read this forum a lot and know that some of you guys are much more than "buy and hold" investors. Were you ever approached by the tax services?

I don't mind paying taxes but this is a bit too much. I don't see a good reason, to risk my money just to be classified as professional and lose large portion of capital gain because of some low volume option contracts. Better to spend that money on beer.

One more thing... one is alowed to hedge his own position but not to sale them before 6 months. That makes hedhing useless.

Last edited by IceCold; 07.12.2018 at 23:30.
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Old 08.12.2018, 10:29
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Re: Short term capital gains taxes in switzerland

it's the cost of doing business and everyone wants their cut, including the tax office. you are informing yourself of all the costs upfront. if you don't like them then don't get involved.

as i said before the capital gains is unlikely to be an issue, depending on your strategy. and as I said above the "5 rules" are deliberately woolly for YOUR benefit. it is the individual tax return assessor assigned to your tax assessment that will decide if you are considered a professional trader. you have the right to appeal the classification. it is seems to be the experience that they are pretty lenient because the rules are deliberately woolly (in combination!). you could in fact contact this person and see what they think of your approach and how un/likely you are to be classified.

i could see myself arguing that somewhere between 1-3 month covered calls would be about the limit i.e. in SPY/IWM/QQQ, sell 45 days out 30 delta call, let it expire, or roll it to the next 45 days out. or same for 90 day (3 month plan) or 135 days (4 month) etc. SPY has weekly Wed and Fri expirations now! If I am using those to hedge continuously then it becomes more difficult to justify it as nothing more than an income strategy. 3/4/12 hedges a year would be reasonable, and the tax office IS reasonable in CH.

the main issue I have with the attempt to classify traders is that they focus on 'profits' when in fact what you want to achieve is cost-basis-reduction. it's backwards in my opinion and most authorities I have dealt with don't get it.

Oh, and the paper work! If you start doing anything more that a few trades a month, come year end and tax return time ALL those trades have to be entered in the return software. That is a real pain and an actual real cost of my time!
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Old 08.12.2018, 10:57
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Re: Short term capital gains taxes in switzerland

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The rules to avoid being classified as a professional look pretty extreme. Anything more than "buy and hold for many years" could be problematic. However, I read this forum a lot and know that some of you guys are much more than "buy and hold" investors. Were you ever approached by the tax services?
individually perhaps, but they are used in combination so overall the result is a pretty vague directive! the end result is not absolute!

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I don't mind paying taxes but this is a bit too much. I don't see a good reason, to risk my money just to be classified as professional and lose large portion of capital gain because of some low volume option contracts. Better to spend that money on beer.
well, get drunk then! it should be clear to you now that capital-gain is very unlikely to be an issue if you are (as we think) a 'small time' trader like many here. what will happen is that your profits from trading will be added to your gross income and your marginal personal tax rate will go up accordingly. and an AVS/AHV adjustment will be needed. you are not going to lose more than a few percent of you profits, if even 1--2 per cent.

perhaps you should actually measure the risk and the cost. i would suggest it is more likely you will loose all your trading money than the tax office will take more that 10% of your profits!

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One more thing... one is alowed to hedge his own position but not to sale them before 6 months. That makes hedhing useless.
6 months relates to the underlying security. hedging is not part of that. consider my example previously. 1/3/4 months covered calls would be an example of what I think is an acceptable hedging approach. If your in the weeklies every week then it is harder to justify.

as you described you seem to be a classic covered call type person. if you are doing this in a limited number of underlyings with1/3/4 month options I don't see an issue. if you are more than that or an active day trader and using all the instruments then you have the additional cost of doing business.
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Old 06.03.2018, 09:16
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Re: Short term capital gains taxes in switzerland

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Hi Im new to this forum and switzerland.

I trade US stocks and I have short term (same day to a few months) capital gains and losses

I heard that switzerland has no capital gains tax but does that apply to foreign(to them) stocks traded short term?

does that apply only to citizens or residents with b and c permits dont pay that either?

Thanks
You indicate you are resident in the USA. So isn't it irrelevant what the Swiss tax system is (except for withholding tax) as you pay your taxes to Uncle Sam??
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