Hi poor swiss,
I started using SYEP (Stock yield enhancement program) with IBKR in 2021 or early 2022. It took me a while to understand what the program actually does so I wanted to share and am welcoming any additional comments people have.
I don't cover the intro to SYEP here, the poor swiss explains the mechanism and the risks. I also don't cover the particular securities I mentioned below - but can recommend to read on it.
If you do SYEP you will have the following relevant cash-flows
a) Interest on the collateral that is deposited
b) "Interest" on the lent securities (IBKR gets the same amount - so that explains a lot of IBKRs income!)
c) If the security is not lent out on the dividend date: Dividends on the securities that are lent out
d) Payment in Lieu (PIL) of Dividends that are lent out
e) If the security is not lent out on the dividend date: US Tax on Dividend (15%)
f) US Tax on the PIL (15%) (considered as a commission from swiss tax side)
Note that in terms of tax - the main implication is that f) cannot be recovered. (in Da-1 you state 15% anrechenbare Quellensteuer; then give the absolute amount, but only the dividend amount excluding PIL). In terms of tax, i declare a) as interest on the cash account; b) as additional income, c) and d) together as income of that security. e) on DA-1.
Is the income relevant? You actually cannot control which securities are lent out, but IBKR gives a detailed account on what security is lent out from when to when and how much interest you receive from every security. The interest on the security can vary extremely depending on security and time! In my case there were so called ibond ETFs from ishares (portfolios of high-yield "junk" bonds) that were in high demand for some reason. And I give some rounded numbers below. Consider that those were the ones in demand, so this is a biased (positive) sample. Other securities such as VOO or VEU, for example, did not lend out well.
Of an overall ishares ibond ETF portfolio of 160kCHF the cashflows were as follows roughly:
- 6kCHF dividends
- 5kCHF PIL (meaning the securities were lent out half of the times during dividend date despite IBKR telling that they try to get the securities back on dividend date)
- SYEP income 1 : 1.5 kCHF interest on collateral
- SYEP income 2: 3.5 kCHF interest for lending out
- (minus 1kCHF of US Tax on dividends that will be recovered from tax authorities)
- SYEP loss: minus 1kCHF of US Tax on PIL that cannot be recovered
So this makes overall 15kCHF income before tax. This compares to 11kCHF income before tax if I would not activate SYEP. Or in %: The income without SYEP would be 6.8%, with SYEP 9.4%. This is not representative, but nevertheless quite impressive and I would not have expected that when signing up.
Let me know your thougths!
I started using SYEP (Stock yield enhancement program) with IBKR in 2021 or early 2022. It took me a while to understand what the program actually does so I wanted to share and am welcoming any additional comments people have.
I don't cover the intro to SYEP here, the poor swiss explains the mechanism and the risks. I also don't cover the particular securities I mentioned below - but can recommend to read on it.
If you do SYEP you will have the following relevant cash-flows
a) Interest on the collateral that is deposited
b) "Interest" on the lent securities (IBKR gets the same amount - so that explains a lot of IBKRs income!)
c) If the security is not lent out on the dividend date: Dividends on the securities that are lent out
d) Payment in Lieu (PIL) of Dividends that are lent out
e) If the security is not lent out on the dividend date: US Tax on Dividend (15%)
f) US Tax on the PIL (15%) (considered as a commission from swiss tax side)
Note that in terms of tax - the main implication is that f) cannot be recovered. (in Da-1 you state 15% anrechenbare Quellensteuer; then give the absolute amount, but only the dividend amount excluding PIL). In terms of tax, i declare a) as interest on the cash account; b) as additional income, c) and d) together as income of that security. e) on DA-1.
Is the income relevant? You actually cannot control which securities are lent out, but IBKR gives a detailed account on what security is lent out from when to when and how much interest you receive from every security. The interest on the security can vary extremely depending on security and time! In my case there were so called ibond ETFs from ishares (portfolios of high-yield "junk" bonds) that were in high demand for some reason. And I give some rounded numbers below. Consider that those were the ones in demand, so this is a biased (positive) sample. Other securities such as VOO or VEU, for example, did not lend out well.
Of an overall ishares ibond ETF portfolio of 160kCHF the cashflows were as follows roughly:
- 6kCHF dividends
- 5kCHF PIL (meaning the securities were lent out half of the times during dividend date despite IBKR telling that they try to get the securities back on dividend date)
- SYEP income 1 : 1.5 kCHF interest on collateral
- SYEP income 2: 3.5 kCHF interest for lending out
- (minus 1kCHF of US Tax on dividends that will be recovered from tax authorities)
- SYEP loss: minus 1kCHF of US Tax on PIL that cannot be recovered
So this makes overall 15kCHF income before tax. This compares to 11kCHF income before tax if I would not activate SYEP. Or in %: The income without SYEP would be 6.8%, with SYEP 9.4%. This is not representative, but nevertheless quite impressive and I would not have expected that when signing up.
Let me know your thougths!
