Pro trading and tax situation

[yakari1400]

Good morning,

I'd like to start trading derivatives ("wheel strategy" on options for those in the know) and other "high-risk, high-potential" trades. It goes without saying that only a limited part of my assets, my "play money", would go into this kind of activity.

I looked into the tax status of such investments and apparently if you do this, the tax authorities consider you a professional trader, even if you have a salaried professional activity at 100% and trading is just a hobby. Source: the Federal Tax Administration's list of criteria for determining with certainty that someone is not a professional trader. not a professional trader (circular n°36), which I wouldn't fill out. My cantonal administration has confirmed that if I am considered a professional, the whole of my earnings, including on my long-term investments (i.e. the majority of my portfolio) would be taxed. It's not possible to declare the "options" part of my portfolio as pro and the "equities" part as private.

I want to avoid being taxed on my entire portfolio at all costs.

So I'm thinking of setting up a company to "encapsulate" this trading away from the rest of my long-term investments, which would remain private (and therefore tax-free on gains). The company would have to meet the following requirements:

• Possibility of recovering profits solely as dividends, without salary, to avoid social security charges
• Possibility of being sole shareholder
• Simple investment and withdrawal of new funds (excluding start-up capital)
• Donations can be made from profits and deducted for tax purposes
• Margin trading possible.
• Minimum taxes for my personal situation: main income from salaried employment, the company would only be a secondary income. I am married. Tax domicile: currently FR, may change to potentially any Swiss canton or abroad, but most likely in the next few years: VD.
• Avoid paying federal stamp duty on my transactions
• Minimum costs excluding taxes (trustees, accountants, banks, brokers), resp. possibility of doing a maximum amount of administration myself.

Specifically, I was thinking of setting up a limited liability company with a starting capital of 20,000 francs, of which I would be the sole shareholder. I would found it in the canton of Zug (only because Baar is pretty, absolutely not for any other reason, especially tax reasons 😝 ). The capital would be used for a few start-up costs (buying a computer, etc.) and then fully invested in trading with a cheap broker (like IB). If I wanted to invest more, I'd borrow from the company out of my private wealth at 0% interest. The company would repay this loan from my private wealth and keep the profits. The "work" I would do for this company would not be directly remunerated, I would only receive the dividends.

It's clear that I'll need professional advice to complete this project. However, I don't really know where to look or where to start. So these are my questions:

• Has anyone done this before? How did you go about it? Is there a more appropriate structure than a limited liability company?
• Where can I find information (free or paid) to develop this project? I know German and English if necessary.
• How can I get advice on this project? I imagine you need someone a little more specialized than the first name that comes up when you search for "fiduciaire + (mon domicile)" on a search engine.

If anyone has any advice, thank you in advance.

PS: I've posted this text on several forums, so if you see it elsewhere please reply only once on your favorite platform. I'll make a summary of my choices when I've had all the info and publish it wherever I've asked this question.

[Jerome]

Hi

This is outside my area of expertise, but you can already read this post by a reader who is following a similar path to yours. I'll try to contact him about your topic. Maybe he'll have some ideas...

Will31 presentation

[yakari1400]

Thanks for the reply. I didn't see a link to contact Will31 myself, but if you did we'll wait for his reaction.

Advice on other forums would be to get advice from a trustee. I'll see if I can send them a document similar to the post above and get an opinion for not too much money.

[Jerome]

I contacted Will31, but unfortunately no answer yet. It's a pity, because he had already started thinking about the subject.

[bratch]

Good morning,

Have you finally decided to go the SARL route, or are you still looking for information?

Greetings

[yakari1400]

Hello bratch,

I got advice from a trustee and asked my tax authorities. I need to set up a limited liability company. I'm in the process of setting it up, but not being a specialist and not having much time to spare, I'm not making much headway on the subject ^^.

[bratch]

Excellent news, we can talk to the tel if we need to,

Greetings

[yakari1400]

Well, I've made some progress on the subject and have my answers: it's not (yet) profitable to set up an investment company in my case. For the record, here are the elements that led to my decision:

such a company is legally a domiciliary company, i.e. one whose sole purpose is to hold financial assets (it is not, however, a holding company, as it does not own majority stakes). And this is where things get complicated:

Money Laundering Act (MLA)
A domiciliary company is subject to the Money Laundering Act (MLA) as a financial intermediary (art. 6 al. 1 let. d and al.2). In addition to a number of easy - but tiresome - obligations, there is the requirement to join a self-regulatory organization (art. 14 and 15 MLA). Such membership costs at least CHF 2,000 per year...

Banks
Banks are very wary of domiciliary companies, because if such a company is used for money laundering, the bank itself can be condemned. As a result, most banks charge a very high account fee (CHF 10,000/year) to open an account. Good to know, Valiant is the only bank I've found that offers moderate fees (<2,000 frs./year).

SICAF/SICAV
I haven't fully studied this subject, because with the two points above it was already clear to me that I wouldn't be making my company. However, for the sake of completeness: FINMA recognizes two types of investment company, the Société d'Investissement à CApital Fixe and the Société d'Investissement à CApital Variable (variable-capital investment company). The minimum capital required to found such a company is 500,000 francs, much higher than what I'd like to invest in such a company today. It is quite possible that this limit also applies to any type of investment company, so that founding an investment company with a capital of 20,000 frs. would not be possible in any case. Under certain conditions, such companies can be exempted from FINMA authorization, which makes things much simpler.

Conclusion
I won't be continuing this project for the time being. I hope, however, that this feedback will help other people who have the same questions as me. A word to the wise: if an existing company has surplus cash to invest, it is not a priori subject to the same strict laws. This could be an interesting option for an entrepreneur, but I don't know enough about it to give any information.

[Jerome]

Thank you Yakari for this valuable information. It confirms what I thought intuitively, without going into as much detail as you did. It's nice of you to share your conclusions, in any case, and it reinforces my choice. I'll have to see if there are other avenues to explore.

 

 

[brigantium]

Have you thought about a sole proprietorship instead of a limited liability company?

I'm currently in the process of becoming an independent day trader and was thinking of setting up a sole proprietorship so that I can deduct expenses and continue to be insured for death, disability, etc.

However, it's very hard to find information on the web.

Many thanks for your feedback.

[yakari1400]

No, I didn't think of doing an individual reason, because my aim was to separate trading from my long-term investment. So I can't help you with that. Sorry, but good luck anyway!

[brigantium]

Thanks for your reply!

Yes, it's not easy to find information for Switzerland. I find much more information for other countries!

[Author]

Posts