[HowBy]

Hello Jerome,

Are you sure that the US dividend withheld is deducted from your Swiss tax, and not just from your taxable income?

It seems that the ACI has a choice.

CH-US Convention art. 23 para. 1 let. B

(b) Where a resident of Switzerland receives dividends which, in accordance with the provisions of Article 10 (Dividends), are taxable in the United States, Switzerland shall, subject to subparagraph (c), grant a relief to such resident upon request; such relief consists of:

(i) by the imputation of the tax paid in the United States in accordance with the provisions of Article 10 (Dividends) on the Swiss tax imposed on the income of this resident; the amount so imputation may not, however, exceed the portion of the Swiss tax, calculated before the imputation, corresponding to the income taxable in the United States, Or

(ii) in a flat-rate reduction of Swiss tax, Or

(iii) a partial exemption of the dividends in question from Swiss tax, but at least a deduction of the tax paid in the United States from the gross amount of the dividends.

  Switzerland will determine the type of relief and regulate the procedure according to Swiss requirements concerning the execution of international conventions concluded by the Confederation with a view to avoiding double taxation.

Switzerland therefore seems to be able to freely choose, for example, option (iii), the most advantageous for the tax authorities. I wonder whether each canton chooses an option or whether there is a common federal rule. Where could one find a text that officially indicates the Swiss requirements?

 

NB the USA is more generous:

2. In the case of the United States, double taxation is eliminated in the following manner: next:
In accordance with the provisions and subject to the limits provided for by the legislation of the United States (as may be amended from time to time without affecting the general principles set out herein), the United States grants residents or citizens United States as a deductible credit against United States income tax the appropriate amount of taxes paid in Switzerland…

[HowBy]

Hello Jerome,

Why is there a difference between foreign withholding tax on US dividends, and additional US withholding tax, withholding tax, but only by a Swiss depository (which excludes IB)?

Does money smell different depending on whether it comes from Switzerland or elsewhere?

Can we avoid double taxation in both cases, US and CH?

I have a friend who says that it is only the deduction made by a Swiss depositary that applies as a deduction from Swiss tax. If this is true, the 15% tax deducted at source by IB becomes a simple operating expense, and Switzerland taxes on the remaining 85%, without taking into account the Tax Convention to avoid double taxation.

It would then be much more fiscally interesting for IB to pay us through a Swiss subsidiary.

As is often the case, “the devil is in the details.”

[HowBy]

Good morning,
I am a little surprised by your deduction of 30% at source for the US divs.
When I opened my account with IB, they actually started with 30%. I complained and they kindly guided me to fill in the information about my country of residence CH online. It went back to 15% and they refunded me retroactively.
It is your broker who must make a correction. But I can understand that it is complex for them, and very unprofitable.

[HowBy]

Hello Jerome,

I would like to be wrong, but by reworking on the site https://www.vd.ch/themes/etat-droit-finances/impots/impots-individus-personnes-physiques/calculer-mes-impots/#h2_vd_calculette_resultats

I think it's even worse than 45%. For large investment income we exceed 60%.

This is assuming that the dividends are 5%, therefore a fortune equal to 20 times the income.

For an employee with a small fortune (500,000) the marginal rate of 45% is reached at 300,000 of income, and the withholding tax of 35% is no longer recoverable from 130,000 of income.

From 100,000 of investment income, it will be worth moving to the French Riviera (not to mention Portugal)

My table:

The rich are to be pitied... LOL

 

 

[HowBy]

Hello everyone,

The perception of taxation depends a lot on the level of one's income and more precisely on one's marginal tax rate.

If you earn income that is considered ordinary in Switzerland, the tax on a few additional dividends will be relatively low and you may be able to recover a little if you were deducted 35% at source. Note that a foreign broker like IB deducts 15% at source on US dividends but nothing for the Swiss tax authorities (unless perhaps you received dividends of Swiss origin – this would need to be checked).

A Swiss resident may have a marginal tax rate of 45% (try it on the Vaud canton simulator). In this case, a dividend of $1000 on an American stock at IB will be taxed 15% at source, then an additional 30% when declaring income.

We are far from the naive image of a Swiss tax haven. When will a "flat tax" of 30% including tax (except capital gains) be introduced, as France will do from 2018?

[HowBy]

The question that really bothers me is: is it possible for a Swiss to multiply his gains by using the margin credit offered by IB (rate < 1%), without incurring the disadvantages of the securities trader, taxed on his capital gain, including AVS. With IB and the least bit solid securities, one could multiply his investments by 4. Regular returns of 30% would become easy to achieve, on the US market.

The tax authorities have a rule (AFC Circular 36 of 2012) regarding foreign financing, which appears to allow financing as long as the income generated is greater than the passive interest, which would obviously be the case.

Is there any feedback here from real-life experiences?

Note that on IB, we borrow without even realizing it. The words "loan" or "debt" are absent. We simply see a negative sign appear on the total of cash, and a very small interest bill.

[HowBy]

Thank you for these details.
In the old days there was a saying: "a tax deferred is a tax saved", because interest rates were high. Today the difference is less, but I still prefer to pay 1 year later.
The taxman could very well impose the tax on the ex-div date, because the dividend is then irrevocably acquired. So much the better if he does not.

[HowBy]

regarding the year of taxation of dividends (US source only in my case) can someone confirm for me if it is indeed the year of RECEIPT of dividends which counts for the Swiss tax authorities, and not the year of declaration or the year of the "ex-dividend".

This is far from trivial in my case, because I am expecting juicy dividends that will become "ex-dividend" at the end of December and this is my first year of investing. So I want to know if I should liquidate just before the Ex-div date, or if I will be taxed in 2016 or 2017 for the corresponding dividends, which I will only receive in January. I am on IB and they include in my current balance the unrealized dividends (accrued) from the ex-div date, but they give me a report on the dividends collected and the US tax deducted (15%) before collection.

Examples of titles:
PSEC monthly dividend ex-div on December 28 payment around January 20
Quarterly ARI ex-div December 28 payment around January 15

If anyone is in a similar situation I would be happy to discuss further, as this is all still unclear to me and I am feeling my way.

[Author]

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