How are stocks taxed in Switzerland?
Private capital gains are tax-free. Dividends get taxed as income and the portfolio as wealth. Anyone classified as trading as a business loses the exemption.
Switzerland is unusually favorable for retail investors. Sell a stock at a gain, and that capital gain is generally tax-free for private individuals.
Other things get taxed instead. Dividends and interest count as investment income and get taxed as income. On top of that, your portfolio counts toward taxable wealth and is subject to cantonal wealth tax.
Swiss dividends and interest have 35 percent withholding tax deducted upfront. If you get 1,000 francs in dividends, only 650 francs land in your account at first. The 350 francs aren't lost. You get them back through your tax return if you declare the dividend there.
The decisive trap is called trading as a business. Anyone trading very frequently, using credit, or drawing a large share of their income from capital gains can be classified as a business trader. Then the gains become subject to income tax, including social security contributions.
An example: Luca buys stocks for 10,000 francs and sells them two years later for 14,000 francs. The 4,000 franc gain is free of income tax for him as a private individual. But that only applies to private assets. If the tax office classifies Luca as a business trader, he pays income tax and social security contributions on the gain, just like on a salary. The exemption is set out in the Federal Direct Tax Act, and the Federal Supreme Court has confirmed it several times. Real estate and a few special cases involving company holdings follow different rules.
The tax administration names five markers under which you count as a private investor. You hold your securities for at least six months. Your capital gains make up less than half of your net income. You trade at most five times the value of your portfolio at the start of the year. You use derivatives only for hedging. And you invest only your own money, without credit.
If you meet all five, you're on the safe side. If you miss one, you don't automatically count as a business trader, the canton then looks at your individual case. Tax offices pay attention above all to fast trading, a lot of expertise and borrowed money. So tax-free capital gains are no license for trading. They're meant precisely for people who invest calmly and with their own money.
Summary
- Capital gains tax-free, dividends as income, the portfolio as wealth.
- You reclaim the 35 percent withholding tax through your tax return.
- Frequent trading on credit can cost you the exemption.
Did you get it?
What's tax-free for retail investors in Switzerland?
Capital gains from private assets. Dividends and interest are taxable income.
What happens to the 35 percent withholding tax?
It's reclaimable if the income is correctly declared on the tax return.
Which criteria point to trading as a business?
Short holding periods, a high share of income, large transaction volume, derivatives, and debt financing.
Sources and further reading
- Federal Direct Tax Act, Article 16 paragraph 3. View source ↗
- Cantonal tax authorities' criteria catalogs on trading as a business
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