Interactive brokers in Switzerland

Finance, Taxes, Banking, Insurance and Retirement
1
Hello fellow investors,

After much pain and hardwork I have zeroed on Interactive Brokers for making long terms investments in German/US stock exchanges. Nothing fancy, just plain stocks. I have a few questions before I take the plunge.

a) Seems at least a few people have tried interactive broker here, can someone tell me if it is a good brokerage firm, in terms of execution ?

b) When you get dividends from US/German stocks, how much is deducted as withholding tax ?

c) Would you recommend ib ?

To help people who might be considering investing, I will list a few brokerages who offer services in Switzerland and tell you why I chose not to use them.

UBS/Credit Suisse: They are in this for the money (surprise !). You pay a custody fee for them to keep your stock. This can be around 100 chf/year easily (even for small investors). Their brokerage is around 1% i.e. if you buy stock worth of 4000 chf on SIX (Swiss stock exchange) you pay 40 chf+(~3 chf, stamp duty). If you do it on the phone, you pay 80 chf + (~3 chf). You also pay while selling. So you are down 2% to begin with.

PostFinance: No custody fee. Moderate commissions compared to banks UBS/CS. More or less similar to Swissquote. For < 5000 chf you pay 25 chf, 5000-10000 chf you pay 35 chf and so on. If you want to stick with SIX then postfinance is highly recommended. Does its job quite well. The problem comes when you want to invest in say Germany/US exchanges. In this case you need to convert your chf to usd/eur. Their spread is around .04 wide. Which means that they will sell Eur for ~ 1.42 and buy it for ~ 1.38 (when the price is ~1.40). So if you want o convert 4000 chf, you loose 4000*0.02 = 80 chf. This is not ideal. Which brings me to:

Swissquote: Their spread is quite small. If eur is selling for 1.4238 chf then you will probably end up paying 1.4240, or maybe less. Pretty good. they have a similar commission as PostFinance although you can trade for <2000 chf and pay comparable commissions. PostFinance charges the same 25 chf for everything < 5000 chf, even say for 2000 chf (this means > 1%). So you would think Swissquote wins. But no. Swissquote has custody fee. Which means they charge you for keeping your stocks. Again between 12.5 chf - 25 chf /quarter. So, 50 chf-100 chf/year. This brings me to IB or interactive Brokers.

Interactive Brokers: One of the lowest costing brokerages around. Offers many markets to trade on (including the emerging markets such as India). Has slightly complicated rules for brokerages, but one can learn those. Have no custody fee. The only problem is that they ask you for 10$ commission/month i.e., you have to generate 10$/month for them by trading. Otherwise, you pay the difference. For example, if you traded once and paid a commission of 9$, you pay 1$ that month. If you do not trade for a year, then you pay 120$ for that year. It seems that this is like a custody fee, but if you are a small regular investor then you would be able to generate something like this.

I have so far tried PostFinance, UBS and Swissquote. So if you have questions, I will be happy to answer.

For people who are using IB, please add what you can.

Thanks,

-Ip

2
My understanding is that no withholding tax is deducted for foreign stocks. Though these should be declared on your annual tax return...

3
Not true. Withholding tax is often deducted on foreign stock. You have a right to claim this withheld tax back if there's a reciprocal tax agreement (there probably will be) because you're paying tax on the stock to Switzerland. However whether you will actually be able to claim the tax back depends on the broker and whether they can be bothered/have this facility. However you can just claim it as a credit on your tax return. Germany and France have the right to charge up to 15% WHT on stock dividends as an example.

4
Yes, their execution is as good as any retail service, and far better than most.

It depends on your nationality & your residence. If you are a US citizen, there is no withholding at all on US stock dividends. For Germany, it is a simple matter to go to IB's website, tell them your nationality & residence, and just ask.

I've had an account for eight years, and am quite happy. Do understand, however, that IB is not a very user-friendly company, so queries are often answered with "go read the manual".

5
Have you tried Saxo Bank? - have not personally used them but understand that their fees are very low and have heard good things about reliability and user friendliness

6
I've used them but didn't continue with them. Their fees aren't *great* but from a platform point of view, I've never seen better. It's quite frankly awesome.

7
So, I have finally taken the plunge and opened an account with IB UK. The application is waiting for approval.

I have a question. Which way do you transfer funds to IB UK ? Is it a wire transfer or online bill payment ? The online bill payment is immediate but only shows USD. I would like to transfer funds in chf and not deal with the conversion issues.

Any help from the IB-veterans will be appreciated.

Regards,

-Ip

8
The Forum members who provide answers have helped me many times. Thanks to all. I am delighted you asked a question I can answer.

I have used every feature of IB. My account at IB is based on my CH address.

For a deposit or withdrawal, You will do better by the use of whatever currency you have in your other account. Within IB, you can make the currency conversion yourself via the Forex Trading. You can select the best exchange rate for your gain. The value of the net remaining amount will be higher at IB than other Forex method. I have observed many times in doing the Forex at other institutions, result often in a net loss of value, apparently due to some undisclosed fee of the bank or broker.

The deposit procedure for IB is very specific. e.g. you cannot simply make a deposit, the "notification" is required or they reject your deposit! Details:

Notification to IB via website login Account Management Deposit Funds..

For your protection, we require you to submit a deposit notification in order to deposit the funds to your account. If you made multiple deposits, we will require a notification for each deposit. In order to complete a deposit notification you will need to follow the below instructions. You will need to visit our website: https://www.interactivebrokers.com/U...ntAccess.Login .

Account Management

Funds Management

Cash Transfers

Transaction: Deposit Cash

Wire

Detail Cash sent+ Currency+ bank+ bank account number.

Print the resulting messages. If you have any questions or concerns, please contact our Funds & Banking Department via Message Center or IB-Chat.

Further detail:

http://individuals.interactivebroker...ountmanagement

IB has more offerings of various securities, stocks, bonds, Forex, ETF, etc. than I have found at any other broker.

May you obtain the best gains possible.

James Dielschneider

9
wanted to rep this post but ran out of greenies.

currently looking for a platform to do infrequent trades in US stocks (mainly buy and hold). wanted to avoid anything with custody fees as bleeding 1% each year isn't really the ideal environment to end up with a winning position. ability to contract for differences (to go 'short') would be nice.

PF may be suitable depending on how the FX spreads can be managed.

10
I have used IB, Saxo, TD Ameritrade and many others ... some as individual, others as a professional investor. IB is great for a professional, less useful for an individual. Saxo is good for private use, but Schwab and Ameritrade are easier to 'learn'.

Individual needs and tastes vary so much that the only way to really find out what works best for you is to try a few platforms yourself. Of course there is a cost involved - in time, money and effort.

11
You can circumvent the minimum fee by opening an account via captrader.de .

One thing about the dividends: For a German citizen residing in Switzerland IB will use these rates for the withholding taxes: http://www.djindexes.com/mdsidx/down...olding_tax.pdf

Does anyone here know what happens to the tax withheld when filing the tax documents with the authorities? Will they take care of everything or does one have to fill in forms for every country one owns stocks from to get taxes back in excess of the 15% the countries seem entitled to? Does anybody know how the whole process works?

12
Credit Suisse had a good service but they closed it.

Then I switched to UBS but found them expensive

Now I use Post Finance.

Probably there are better US based brokers but I never got to realy closely investigating their costs & offers.

13
I'm bumping this thread because I'm interested in the topic.

Interactive brokers seems extremely cheap for active traders, as in many (most) cases you will be paying a paltry 1 USD per order.

But it can get expensive for buy and hold trading due to the "minimimum activity" of 10 USD per month - and I don't count on doing 10 orders per month at all.

Anyone care to chime in on their opinions of better online brokers for a buy and hold investor looking to get into ETFs? So far Schwab and TD Ameritrade look promising, even though their rate for order is some 8x or more than the 1 USD per order of IB, that should not matter for buy and hold and compared to IB for each order, the difference will already be compensated after the first month of inactivity.

14
Interactive Brokers is worth it. You can trade a lot of different things (stocks, bonds, commodities, futures) from a lot of different countries. The options to deposit and withdraw into any account into any country in whichever currency is also be convenient.

The learning curve is a bit high at first and you have to pay a few fees here and there, but they're not so bad and very reasonable. You get one free wire out per month (free withdrawals if you mark them as being slower).

15
Hi,

So how do you guys declare your IB transactions on the CH tax return? If you have even a low level of activity, up to 10 options trade a month, that would be 120 entries that have to be recorded in the DA-1(?) transaction pages of the tax return. That seems like another bit of work. Or do you simply decalre it upfront on Page 1 as another revenue source and just give the P from the anual P&L?

bill

16
I am a fan of Vanguard for ETFs. All of their ETFs (in the US) are commision free and have really low mgt Fees (0.02-0.24%)

Minimum balance is $3000

17
There are many German online-brokers. You can buy the same stuff, have CHF-accounts with them, usually their fees are lower than with Swiss banks... And they ́re happy to take customers with Swiss addresses, not many questions asked!

www.dab.com ("Direktanlagebank")

www.cortalconsors.de (German branch of French "BNP Paribas")

www.comdirect.de (Online version of Commerzbank)

There are many more...

18
I noticed that several people have said they do their money exchange with IB and get excellent rates. I tried their TWS demo to trade US$ into CHF. I got the Interbank rate and they charged me $2.50 commision. ($1200 trade) Thats about $15 dollars less than I would be charged by xe.com and about $7.5 less than currencyfair.

The only issue i had is that on the demo version i couldnt make trades with CHF into US$. I could trade CHF into yen, kroner and a few other currencies but not $. Is that a restriction on the demo version or is the real one also blocked?

19
Umm demo version I would say. I have had an IB account for a long time and have traded USDCHF many times.

20
USDCHF worked on the demo version...however CHFUSD didnt...or maybe its just my noobiness thats not seeing it. Perhaps theres a way to invert USDCHF that i didnt see