Has anyone had success using leveraged ETFs in Switzerland? I know there are some steps to take to use Interactive Brokers USA to use these products but not sure how that works in Switzerland. Here’s a Reddit thread on it. Will this automatically add someone to the professional investor list ?
UPRO and leveraged ETFs in Switzerland
- Thread starter Jdrizzo89
- Start date
Hi
To be sure, you would have to ask your local tax office.
In general, as long as you do long-term investing with these leveraged ETFs (and not short-term bets), you should be good. But if you start to actively trade it, you may run into issues.
That being said, it's true that one of the criteria for being considered a professional investor is to use leverage. So it may already be on the edge of what you can do.
To be sure, you would have to ask your local tax office.
In general, as long as you do long-term investing with these leveraged ETFs (and not short-term bets), you should be good. But if you start to actively trade it, you may run into issues.
That being said, it's true that one of the criteria for being considered a professional investor is to use leverage. So it may already be on the edge of what you can do.
I’m thinking the strategy that I run, I would automatically be considered professional anyways bcuz I do frequent monthly rebalancing. Which for me, isn’t a big deal. I am am American so even if I have the long term capital gains, I would still have to pay the American taxes. In this case, I would pay any gains as income and most likely not get taxed in USA.
If you are likely to be already taxed as a professional investor, adding leverage would not change that; indeed, you would just tick an extra box.
In the US, do you pay taxes on short-term and long-term capital gains or only one?
In the US, do you pay taxes on short-term and long-term capital gains or only one?
I meant more from an active management side as the rebalance frequency with a momentum filter leads to turnover. Although these products do use swaps so it’s possible they could be considered derivative products instead of normal ETFs.
In US, you pay short term capital gains as income and long term pay 15%. You don’t get double taxed though due to the tax agreement
In US, you pay short term capital gains as income and long term pay 15%. You don’t get double taxed though due to the tax agreement
Did a little more reading.
So I believe that my US “IRA” will be tax free no matter what as it is considered similar to pillar 3. So theoretically I could continue any active strategy in that tax free. Not counting for wealth tax either.
For a non tax protected normal brokerage account, if I adjust rebalance dates to every 6 months, I would qualify for the tax free capital gains in Switzerland. I think only rebalancing every 6 months the turnover wouldn’t be that high. Plus although LETFs are indeed leverage they might not be categorized as such by the local tax office.
So I believe that my US “IRA” will be tax free no matter what as it is considered similar to pillar 3. So theoretically I could continue any active strategy in that tax free. Not counting for wealth tax either.
For a non tax protected normal brokerage account, if I adjust rebalance dates to every 6 months, I would qualify for the tax free capital gains in Switzerland. I think only rebalancing every 6 months the turnover wouldn’t be that high. Plus although LETFs are indeed leverage they might not be categorized as such by the local tax office.
Here’s an example portfolio that I would rebalance every 6 months:
10% UPRO, 40% RSST, 10% TMF, 20% AVUV, 10% GDE, 5% TYO and 5% YCS/EUO
Equivalent of 99% US equity, 40% managed futures trend, 30% long treasuries, 15% short term treasury bonds, 9% gold and 5% a currency short hedge.
So it’s risky and leverage but attempt is more for risk parity type leverage with off setting low correlation.
10% UPRO, 40% RSST, 10% TMF, 20% AVUV, 10% GDE, 5% TYO and 5% YCS/EUO
Equivalent of 99% US equity, 40% managed futures trend, 30% long treasuries, 15% short term treasury bonds, 9% gold and 5% a currency short hedge.
So it’s risky and leverage but attempt is more for risk parity type leverage with off setting low correlation.
If the IRA is like a 3a, it should indeed be tax-free inside. So, being active there if you (IRA look more customizable than 3a), should be fine.
You are right that leverage ETFs may not be considered as leverage, but to be sure, you would have to ask the local tax office.
You are right that leverage ETFs may not be considered as leverage, but to be sure, you would have to ask the local tax office.
In my view, it would be not quite logical to consider monthly rebalancing as a professional feature. Robo Advisors do that, and I can't imagine that using them is considered as a professional wealth management.
As for the LETFs, I guess I will know after my 2023 tax declaration.