Taxation on dividends, saving accounts & capital gain taxes

Finance, Taxes, Banking, Insurance and Retirement
1
Dear All,

I know this subject has been covered on this forum to some extent, but I still wasn't able to find the answer I was looking for. Sorry for posting another thread related to this topic.

My situation: I am moving to Switzerland (living now in Belgium). I was wandering how I will be taxed in following situations:

A) Dividends (My stocks are mostly Belgian Stocks located at a Belgian Broker). When I receive the dividend I need to pay 25% tax on it. After moving to Switzerland? What will change? Will I pay taxes in Switerland? How much? Or will I pay 25% in Belgium and can this be on turn deducted from Switerland tax system? Anyone an idea?

B) Tax on saving accounts = in Belgium 15%. Same question as aboce how will this be taxed?

C) Capital gains on stocks. When selling a stock will the capital gains be taxed in Belgium or Switzerland? Anybody an idea?

kr,

Stef

2
Hi,

All tax paid on dividends + interest with either be credited or refunded, you are then taxed as income at what ever rate you pay.

There is no capital gains tax on shares, if resident in CH.

Edit you will have to fill in a Tax return for anything to happen, if your on a B permit your taxed at source. It's not very difficult. If you earn over 120k you will do a tax return in any case.

3
Hi,

I bump this thread because unfortunately I have been unable to find an answer to what I think is a simple question.

This is my first year in CH and I'm a EU B permit holder. I'm in the process of dealing with the paperwork to make my Swiss fiscal residence official in regards to the Administration of my home country so I won't have any tax obligations there. My 2013 tax return has been the last I'll have to fill. For 2014 it will be just a form so that they reimburse what they have retained so far as I'm not a resident for this fiscal year

Here in CH I'm obviously taxed at source on my salary, but what about the interest of saving accounts or dividends received abroad? Or even the interests of my Swiss savings account, or dividends perceived in a Swiss investment account when/if the times comes. Is this something that can be declared in the "déclaration complémentaire" for B-permit holders or does this situation involve my having to do a regular tax return filing like any other Swiss. Unfortunately I haven't been able to see that kind of declaration yet because they have taken it down the site because the deadline is over and they won't put it back online till next year, so I can't wait.

I wouldn't think because most people who come have savings accounts and I don't see the administration switching taxing methods because of that.

Also, what about the wealth tax? From what I've seen the tax at source rate takes into account the assumption that one has a wealth of, I can't recall the exact number, about 50k CHF in total wealth (that is car+accounts+investments). What happen if one has more? Again, is this something that can be declared in the "déclaration complémentaire" or should I file a regular one?

The Vaud law is quite clear and states that for B permits earning less that 120k p.a. the salary is taxed at source and the rest of the income will be taxed at the standard rate which is calculated as if all my income was taxed regularly -not at source. Ok, agreed, and it makes sense.

I want to do this right and to contribute to this country. It is already great that there is no capital gains tax. I have always filed my tax returns myself and I don't see the need for a tax advisor given my really simple financial situation. I just wan't to know which form to fill out.

I realize now that this has become quite a long post. Apologies in advance and thanks for reading and for any help.

And yes, I should drop by the introductions forum, I know...

4
Hello!

I am sorry to bring back such an old post but I had a question on the Capital Gain tax on stocks.

If it's true that there is no capital gain tax, isn't it convenient to invest in ETF/Funds that reinvest the dividend automatically increasing the value of the fund and creating capital gains instead of distributing this dividend?

In case this reasoning is correct, do you know any specific product that follow this mechanism? Unfortunately most part of the ETFs negotiated in the US distribute the dividends (I guess it's convenient under US tax rules, but probably not for swiss).

Let me know if anybody has any direct experience with that,

Regards,

5
There is no CGT on shares for Swiss residents in CH.

EFT's that produce income will be taxable.

Best to invest in an accumulation fund rather than an EFT if paying tax on dividends is an issue.

6
This is a good question. I am curious myself....

I would imagine that the fund manager can not re-invest the dividends gross, as they are long the underlying basket (assuming direct replication method) and would have to pay taxes on the dividends wherever the fund is domiciled. So in effect the re-investment is done using dividends net of taxes. So you benefit from the re-investment growth but there is no getting away from not paying tax on the income originating from the underlying components' dividends.

The only other advantage I would see is that the fund would be quite efficient in terms of paying the underlying dividend taxes...

I think your best bet is to find a dividend accumulating ETF from one of the major issuers and read their KIID / info pages regarding the re-investment of dividends, if all else fails give them a ring.

I know for example that iShares with their Dax tracking ETF for example, re-invest the dividends gross, but have to pay tax seperately once or twice a year to account for dividend tax. Which means if you buy the ETF before the fund pays tax to the German goverment you would lose money as if you received all the dividends accumulated since the last time they paid Tax

Edit: Found an article specifically talking about this Here and here , it's a few years old now but AFAIK it still happens towards the end of April.

Basically it's a form of Tax arbitrage.

7
this "strategy" would be too easy. Even if you opt for an accumulating ETF/mutual fund/etc, the re-invested dividend is subject to your Swiss taxable income. How much the accumulated or re-invested income is can be found on the federal tax administration homepage: https://www.estv.admin.ch/ -> Kurslisten (DE, FR, IT only).

Therefore, theoretically, there should not be a difference if you opt for an accumulating or a distribution share class of an ETF / Mutual fund, etc. In reality the taxable amount can be different (higher or lower) depending on several factors (which I also do not know...but e.g. fund domicile, double taxation treaty of ETF, etc. )

Practical example: For instance: if you compare 2014 figures of the UBS ETF (CH) - SMI (CHF) A-dis (=dividend distribution / http://www.six-swiss-exchange.com/fu...0017142719CHF4 ) with the db x-trackers SMI® UCITS ETF (DR) 1C (accumulating / http://www.six-swiss-exchange.com/fu...0943504760CHF4 ), the income of the distributing ETF (=UBS) was CHF 1.64 whereas the accumulating (= db) was only CHF 0.7991.

So in this example you would be right, but...in 2013, it was the other way around:

taxable income UBS: CHF 1.44

taxable income db: CHF 2.173

see:

https://www.ictax.admin.ch/extern/de...017142719/2014

https://www.ictax.admin.ch/extern/de...943504760/2014

as outlined, the fact "accumulating vs. distributing" should theoretically not make a difference as, even if the dividends are reinvested in the ETF, you need to declare the income part in your Swiss annual tax statement.

but in my opinion there is a "mechanism" which makes a difference to your "return after tax for a Swiss tax payer": instead of opting for an ETF, choose an ETT (exchange trading tracker - which is a certificate or structured product with the same aim of tracking an underlying's performance).

coming back to my example above (ETF on SMI): if you had chosen the UBS ETT on SMI TR Index (instead of one of the acc. or dist. ETFs), this product would not have been subject to Swiss income tax. So your "return after Swiss tax" would have been better like that.

remark:

Obviously, from a risk perspective, by buying a certificate instead of an ETF, you have a higher risk (counterparty)....so an investor would actually expect a higher return.

http://keyinvest-ch-en.ubs.com/produ...n/CH0108347417

and finally:

please remember that not only the potential income tax can have an impact on your "return after Swiss taxes" but also the fees which an ETF/ETT charges, the spread, etc.

8
@Mezze,

For accumulating ETFs, do you know how much of the total income you would be liable for?

Example:

https://www.ictax.admin.ch/extern/de...005933931/2015

The total looks to me like: 2.19317 (2.157 + 0.03617), however since there is no ex-date, the only way you would have received all of that income is by buying the ETF on 1st May 2014 till the 30th April 2015.

Do they pro-rate that income depending on how long you held it for?

It would be unfair if you bought and disposed of the ETF within 6 months only to be liable for income of 2.19 which is only possible if you held it for the full 12 months.

If there is a record date then someone who doesn't want to pay the tax will just dispose of the ETF prior to the record date, so I guess this is not the case.

9
You have a very limited imagination.

Why on earth would you set up a such a fund in a jurisdiction that would subject the funds to taxation?

10

You would be tax liable for the full income (converted into CHF = 2.265) if you hold the ETF on the ex-date (= 01.05.) -> see link.

If you sell it prior to the ex-date, you are not liable. But keep in mind that you need to pay stamp duty of 0.075% for ETFs domiciled in CH / 0.15% for ETFs abroad, transactional costs, spread - so it maybe that it doesn't make sense to sell your holdings just to avoid being liable for income tax...

11
I wasn't sure if that ex-date applied to the second line only or both, as the second line has a different pay-date and the first one doesn't have anything for an ex-date.

Regarding stamp duty I was under the impression that it only applies to shares but not ETFs. The round trip cost of course would be 0.075% x 2 if this was the case. Please forward any official link you might have about it applying to ETFs.

It would indeed make little economic sense if the spread would be big enough.

From a rough calculation:

If the gross income is 2.6 and the tax rate is, let's say, 20% then the spread + costs etc would need to be 0.52 per ETF you hold (assuming the person doing this would hold a lot more than just a few of these) to make the transaction meaningless.

12
CH stamp duty applies to ETFs, too.

http://www.nzz.ch/finanzen/fonds/ste...ser-1.18365021

...fällt eine Stempelsteuer von 0,075% für ETF mit Domizil im Inland und 0,15% für ETF mit Domizil im Ausland an.

the example you used was a foreign ETF, so 2x 0.15% = 0.30% + 2x spread 0.06% = 0.12% plus broker/bank transactional commission (courtage) which should not exceed 0.05% per trade (would not know a broker/bank that trades at so low commissions) --> doesn't make sense to me...

13

Thanks for the NZZ link.

Going back to the example: The spread calculation I don't agree with, as you only cross half the spread, so I would only add 1 x 0.06%.

So: 0.3% (Stamp Tax) + 0.06% (Spread) + 0.1% (Trading cost) = 0.46% per ETF, which currently trades around EUR83.40 which means spending 0.383 Euro cents to save 0.52 which indeed is not viable, given that the spread is not constant specially towards the end of the Fiscal Year.

I am still not sure how the Tax the fund (referenced in the example) pays to the German government affects the income tax the holders of the ETF pay, as it seems to me the income is being taxed twice, once at fund level and the second time as individual level. Or is the Tax paid at fund level taken into account for the calculation? Is it maybe included in the income amount? where the income is effectively gross without the amount paid by the fund deducted.

14
I agree on the spread. But I would be surprised that the trading cost are effectively 0.05% per trade...if I look at the costs of UBS for instance. https://www.ubs.com/ch/de/online-ser...ndel-pk-de.pdf

anyways.

Re the taxation of the ETF itself, I don't know the answer. According to NZZ, the ETFs domicile can have an effect. If you invest in an foreign SMI ETF, the ETF itself must pay 35% withholding tax on dividend earnings - whereas a CH domiciled ETF can claim for a refund of WHT. As other juristictions as well apply WHT or similar taxes, this has an effect on the CH domiciled investor's net return - as some ETF can't reclaim these taxes and therefore it results in a double taxation. For a CH investor who looks to invest into an ETF that covers the US market, Hinder Asset Management suggests to opt for Irish ETFs compared to Luxemburg ones (and worst ones are US ETFs).

http://www.nzz.ch/finanzen/fonds/ste...ser-1.18365021

Or is the Tax paid at fund level taken into account for the calculation? I doubt.

15
Hello,

i am on permit b , not reaching 120k annually. I have received around 10chf (nothing) last year in Apple dividends. I can see in the transaction Withholding tax 30% (US).

Should I declare something? for 10chf?

I hope no

Thanks

16
From https://www.zh.ch/de/steuern-finanze...-Personen.html

A subsequent ordinary assessment is carried out ex officio under the following conditions:

For persons who are subject to withholding tax and are resident in the Canton of Zurich

- if a gross annual income of at least CHF 120,000 is achieved in the calendar year from gainful employment (employment relationship) (in the case of persons living in an unseparated marriage, the gross income of the spouses from employment is not added together to determine the threshold value; in the case of tax liability during the year, the thresholds, the periodic gross income is converted to twelve months and the non-periodic gross wage components are included without conversion)

- if withholding tax credits are reclaimed

- if the income not subject to withholding tax (e.g. income from securities or real estate) amounts to at least CHF 3,000

- if the taxable assets (e.g. securities, real estate) of individuals amount to at least CHF 80,000 or the taxable assets of joint taxpayers amount to at least CHF 160,000

17
That means, i do not have to declare anything? at least i want to give me back 15%? but for 10 chf , does not make sense, right?

18

That means, i do not have to declare anything? at least i want to give me back 15%? but for 10 chf , does not make sense, right?

19
I don't know all your details, so you should check all the conditions I posted above. That said, just the dividend of 10 chf is not sufficient by itself to force you to do a tax return (because the threshold for non-swiss-taxed-income is 3000 chf)

I don't think you can get back the 15% US withholding without doing a tax return. But then, you'd get the 15% back and pay taxes on the whole dividend according to your marginal income tax rate. So we are talking about maybe a few cents of difference, so yeah not worth bothering