Tax on stock market gains in Switzerland: what you need to know

One of Switzerland's most advantageous and least-known tax features: if you invest on the stock market as a private individual, the capital gain you realise when selling shares or ETFs is in principle not taxed. But this rule has trade-offs and limits worth knowing before assuming everything is exempt. This guide sets the record straight.

At a glance

• In Switzerland, private capital gains on securities (shares, ETFs, bonds) are exempt from income tax (Art. 16 para. 3 of the Federal Act on Direct Federal Taxation, LIFD/DBG).
• By contrast, dividends and interest generated by those securities are taxable as investment income.
• The value of your portfolio on 31 December is subject to the wealth tax (cantonal and communal).
• Watch out for the professional securities dealer status: if the tax authority classifies you as one, your capital gains become taxable and subject to AHV/OASI social contributions.
• The withholding tax (35%) levied on Swiss dividends and interest is fully refundable if you declare your securities correctly.

What you need to understand

Swiss tax law does not look at your portfolio as a whole; it distinguishes three things that are treated differently:

1. The capital gain (you buy a share at 100, sell it at 150): this gain on private assets is not taxable. Art. 16 para. 3 of the Federal Act on Direct Federal Taxation (LIFD/DBG) provides for this explicitly. The logical counterpart: capital losses on private assets are not deductible either.
2. The yield (dividends, coupons, interest): it is taxable as investment income, at the ordinary rate (federal, cantonal and communal).
3. Wealth: the market value of your securities on 31 December forms part of your taxable assets and is subject to the cantonal and communal wealth tax.

In other words, you are not taxed on the rise in price, but you are taxed on what your investments pay out and on what they are worth.

Capital gain, dividend, wealth: three different treatments

A summary of what is taxable or not for a private investor:

• Capital gain on sale: exempt.
• Dividends and interest received: taxable (income).
• Portfolio value on 31.12: taxable (wealth).
• Capital losses: not deductible.

The trap: being reclassified as a "professional securities dealer"

The exemption applies to the management of your private assets. If the tax authority considers that your trading activity resembles a profession, it can classify you as a professional securities dealer. The consequences: your capital gains become taxable as income from self-employment, with additional AHV/OASI social contributions on top (but your losses and costs then become deductible).

To provide predictability, the Federal Tax Administration has set out safe-harbour rules in its Circular No. 36 (2012). If you meet all five of the following criteria simultaneously, you are considered a private investor (capital gains exempt):

1. The securities sold were held for at least 6 months.
2. The transaction volume (purchases + sales) does not exceed, per calendar year, five times the value of your portfolio at the start of the tax period.
3. Capital gains are not necessary to cover your living expenses: they represent less than 50% of your net income for the period.
4. Your investments are not debt-financed (or the taxable yields on your securities exceed the interest on the debt).
5. Derivatives (options, etc.) are used solely to hedge your own positions, not to speculate.

If a single criterion is not met, you are not automatically reclassified: the tax authority then examines your situation on a case-by-case basis. In practice, the buy-and-hold investor is far from the risk zone.

Withholding tax and foreign securities

On dividends and interest from Swiss sources, a withholding tax of 35% is deducted at source. This is not a lost levy: you recover it in full by correctly declaring your securities and their yields in your tax return. Failing to declare your securities therefore means giving up that money.

For foreign securities, a withholding tax from the country of origin often applies. Part of it can be recovered through double-taxation treaties (in Switzerland, generally by means of form DA-1 attached to the tax return).

Watch out for a common mix-up: it is the source of the income that determines the withholding tax, not the location of your account. A Swiss share held through a foreign broker is still subject to withholding tax; a foreign share held through a Swiss broker is not (though a foreign withholding tax may apply). A Swiss bank or broker primarily makes the recovery easier by providing you with a detailed tax statement.

What about crypto?

The logic is the same as for securities: for a private individual, private capital gains on cryptocurrencies are in principle exempt, holdings on 31 December form part of taxable wealth, and trading deemed professional can be reclassified and taxed. Income from staking or lending is generally taxable as income.

What to do

1. Declare all your securities and their yields: this is the condition for recovering the withholding tax.
2. Ask your bank or broker for the year-end tax statement (securities statement and income as of 31 December): it summarises everything you need.
3. Keep a record of purchase dates and prices: useful if questions arise about the holding period.
4. If you trade heavily (high volumes, short-term deals, leverage, derivatives), check the five criteria of Circular No. 36 and seek advice before assuming your gains are exempt.
5. In complex situations (large volumes, self-employed activity, many foreign securities), call on a fiduciary/trustee.

Common mistakes

• Assuming everything is exempt: only private capital gains are. Dividends and wealth remain taxable.
• Not declaring your securities to "keep things simple": you forfeit the recovery of the 35% withholding tax.
• Underestimating the reclassification risk when making many short-term trades with leverage.
• Forgetting foreign securities and the partial recovery through form DA-1.
• Mixing up cantonal rules: wealth tax rates and brackets vary by canton and municipality.

Where to find official information

• Federal Tax Administration (FTA)
• FTA Circular No. 36 · Professional securities trading
• Federal Act on Direct Federal Taxation (LIFD/DBG), Art. 16
• ch.ch · Taxes and finances
• Official site of your cantonal tax administration.

How Admini can help

At tax-return time, the challenge is not tax theory but finding the right documents:

• Centralise your year-end tax statements, dividend notices and purchase receipts in one place.
• Find purchase dates and prices for your securities in seconds to make your return easier.
• Prepare a clean securities dossier to hand to your trustee or attach to your tax return.
• Get reminders for the tax deadlines of your canton.

The point is not to replace tax advice, but to stop chasing your bank statements every spring.