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 a 35 percent withholding tax deducted upfront. That money isn't lost: you get it back through your tax return if you correctly declare the income.
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.
Buy a stock and sell it later at a higher price, and the capital gain is income-tax-free for private individuals; the rule only applies to private assets, though, and once the tax authority classifies the activity as commercial, the gains get taxed like ordinary income, including social security contributions. The exemption is anchored in the Federal Direct Tax Act and has been repeatedly confirmed by the Federal Supreme Court, with exceptions for real estate gains, share transpositions, indirect partial liquidations, and shell-company trading.
Guidelines for classification as a private investor include, among others, a minimum holding period of six months, capital income below 50 percent of net income, a transaction volume of at most five times one's own wealth, avoiding derivatives except for hedging, and investing only one's own funds with no debt financing. These criteria are points of orientation; classification happens case by case at the cantonal authority.
Since uniform rules are missing, cantons examine each case individually, with rapid trading pace, required expertise, and debt financing drawing tax offices' attention. In practice, that means the tax exemption on capital gains isn't a blank check for active trading, it stays tied precisely to restraint in that regard.
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
- Cantonal tax authorities' criteria catalogs on trading as a business