ETFs & Taxes in Switzerland: Here's what you need to know

If you invest in ETFs, you’ll eventually wonder how they are taxed when it’s time to file your tax return. In this article, I’ll cover the most important points, explain what exactly is taxed, and guide you through the process.

Table of contents

• What taxes apply?
• ETF and taxes: How to complete  your tax return
• How to optimize your taxes on ETF investments
• Conclusion

What taxes apply on your ETFs?

When you start investing, several taxes may come into play. Here’s a breakdown of the key taxes to be aware of:

Income Tax

Generally, only dividends and interest income are taxable—not capital gains. Capital gains are the price increases of an ETF, meaning the difference between the sale price and the purchase price. However, this also means you can’t deduct losses. The tax rate you pay depends on your income and where you live, so you’ll need to declare your ETFs and income in your tax return.

💡 Tip: Since only dividends are taxed and not capital gains, growth-focused strategies can be more tax-efficient than dividend strategies.

Wealth Tax

Your assets, including securities like ETFs, must also be declared in your income tax return. The wealth tax rate depends on your total assets and your place of residence, ranging from 1.3 to 10.1%. Taxation is progressive, so it primarily affects those with assets exceeding CHF 1 million. Unfortunately, there’s little room for optimization here—unless you consider relocating to a tax-friendly area, but that’s beyond the scope of this article.

Source Tax

All income from Swiss equities, including ETFs with Swiss stocks, is subject to a 35% source tax. This tax is deducted directly by your bank or broker, meaning only 65% of the income is initially paid out to you. You can reclaim the remaining amount through your income tax return, as it’s credited against your tax liability. The purpose of the source tax is to ensure investors report their holdings in their tax declarations.

💡 Tip: For Swiss equities, it’s worth choosing an ETF domiciled in Switzerland. Why? Foreign fund providers can’t reclaim the withholding tax, but Swiss-domiciled funds can.

Stamp Duty / Transaction Tax

When buying or selling securities like ETFs, you pay a transaction tax of 0.075% for Swiss-domiciled funds and ETFs, and 0.15% for foreign-domiciled ones. Brokers deduct this tax automatically, so no action is required on your part.

💡 Tip: If you use foreign brokers, stamp duty does not apply. However, keep in mind that foreign brokers typically don’t provide Swiss tax reports, which can complicate filing your taxes. Looking for a good broker? Find my favorites here!

ETFs and taxes: How to complete your tax return

Here’s what you’ll need for your tax return:

• A tax report from your broker. Some brokers charge a fee for this, while others provide it for free. You can upload this report directly to the tax office’s online tool.
  Tip: You can deduct the cost of the report from your taxes.

• If you don’t have a tax report: Collect a summary of your transactions and product holdings. You’ll need to manually input the ISINs of the ETFs in your portfolio, along with their purchase and sale dates, into the tax office’s tool.

• Declare your portfolio’s total value.

🚨 Important: If you’re investing via a 3a account, you don’t need to report holdings as described above. Instead, declare your 3a contributions and attach a confirmation from your provider.

How to optimize your taxes on ETF investments

Here are some strategies to minimize your tax burden when investing:

1. Choose a growth-focused strategy over a dividend-focused one. This reduces taxable income from dividends.
2. Select the right fund domicile:
   • Swiss-domiciled funds for Swiss stocks.
   • Ireland-domiciled funds for U.S. stocks.
   • Luxembourg or Ireland-domiciled funds for European stocks.
3. Choose the right broker: Foreign brokers (like DEGIRO or Interactive Brokers) can help you avoid stamp duty, but you’ll need to prepare your taxes without a Swiss tax report.
4. Deduct costs: Deduct expenses for tax reports and portfolio management from your taxes.
5. Make full use of the 3a pillar: If you don’t yet have a 3a account or only contribute to a single one, consider using the 3a pillar to invest. For guidance on the best 3a providers, check out my comprehensive comparison here!

Conclusion on ETF and taxes

When it comes to ETFs and taxes, there are no magical tricks to completely avoid taxes. It's about knowing what applies and how to file them correctly. What’s far more important in my opinion? That you start investing.