capital gain tax

[danslalune5]

Dear Forum Members,

thre are no capital gain taxes for private investors in Switzerland, and a few guidelines help the tax authorities to destinguish between private and professional investors.

I wanted to take up the guideline saying that private investors should not earn more in capital gain than 50 % of their net income specifically because the implications are still not very clear to me.

Here is the example:
A long-term investor intends to retire. He will retire with a pension of 40 000 CHF and a one-time payment of 1 000 000 CHF of pension benefit which will add to his current fortune of 1 000 000 CHF which is entirely invested in the share market.

Our guy is lucky, and his fortune will go up from 2 000 000 to 2 500 000 CHF in the first year. (His capital gain will be 400 000 CHF, and the dividends will be 100 000 CHF).
Overall, his income before taxes will rise to 40 000 + 100 000 = 140 000 CHF, and his net income might be 100 000 CHF. His capital gain of 400 000 CHF will therefore be way above the 50 % of his net income (50 000 CHF).

Will this person be taxed as a professional (for an income of 540 000 CHF), or still as a private investor (with an income of 140 000 CHF)?

The person in our example can live with 100 000 CHF of net income. Does the tax rule really make a difference between a person who reinvests the 400 000 CHF of capital gain or a person who takes out the money from the account for immediate personal expenses?

Thank you all for your thoughts on this matter!

 

[Baptiste Wicht]

Hi,

There is one important mistake in your computation. The 400'000 CHF are unrealized capital gains. They only become realized capital gains when you sell the shares. And we only get taxed on realized capital gains. So, in your case, you have zero capital gains from the point of view of taxes and are therefore fine.

 

[danslalune5]

Hi Baptiste,

this makes sense and I did hope for this answer, although the guy is not me...
I was wondering for a long time why the tax office would not want to grab part of the unrealized gain on the bank account. It seems that the key question is whether the person depends on the extra "income" for living, or not. And 50 % of realized income with respect to the person's salary or pension benefits is the criterium here.

Thank's again,

Herbert

 

[Baptiste Wicht]

I was wondering for a long time why the tax office would not want to grab part of the unrealized gain on the bank account.

In a sense, they are. The wealth tax is a way of taxing unrealized capital gains as well.

 

[danslalune5]

This is true!