Switzerland: private capital gains on securities not taxed

Swiss tax law distinguishes the management of private wealth from gainful activity. Gains made in the course of the former are not taxed; those made in the course of the latter are taxed as income.

This distinction does not rest on a threshold but on a body of indicators: frequency of transactions, holding period, use of borrowing, share of gains in total income, use of derivatives.

An investor who buys and holds therefore escapes tax on their capital gains; a trader who deals frequently, on credit, and derives a significant share of their income from this activity may be reclassified.

We do not publish the precise criteria for this reclassification or the indicative thresholds used by the tax authorities: they derive from administrative practice and case law that we have not been able to verify in an up-to-date official source.

This exception is not unique to Switzerland. Singapore, which does not tax capital gains either, at a rate of 0%¹, likewise reclassifies transactions that amount to trading.

The flip side of this rule is less well known: losses realised in the course of private wealth management are not deductible either. The regime is therefore symmetrical, and it penalises volatile portfolios as much as it favours winning ones.

The non-taxation of private capital gains only benefits a Swiss tax resident. That status is acquired quickly: federal law sets 30 days² of stay with gainful activity, or 90 days³ without.

These periods are much shorter than the six-month threshold common elsewhere, and they can create dual residency with France for a stay that seemed harmless.

In France, article 4 B of the code général des impôts (French General Tax Code) sets out four alternative criteria, and just one is enough to keep you domiciled there. The France–Switzerland tax treaty then decides between two genuine residences.

Leaving also triggers the exit tax above more than €800,000⁴ of securities, and since Switzerland is not part of the European Economic Area, deferral requires guarantees and a tax representative, applied for at least from 90 days⁵ before the transfer.

A sale during the relief period — 2 years⁶ or 5 years⁷ depending on whether the value of the securities is below or above €2,570,000⁸ — makes the French tax definitively payable, whatever the Swiss rule.

Tax is levied at three levels — Confederation, canton, municipality — and the burden depends more on the address than on the country. Two neighbouring municipalities can carry very different burdens.

The cantons also apply a wealth tax, based on the taxpayer's net assets, whose rates and allowances vary from one canton to another.

This point is essential: the non-taxation of capital gains coexists with an annual tax on the stock of wealth, which changes the equation for a large estate.

Inheritances between spouses and, as a general rule, to direct descendants are, on the other hand, exempt, at a rate of 0%⁹, as the tax is cantonal.

Finally, lump-sum taxation based on expenditure, open to foreigners without gainful activity, requires a federal floor of about CHF 435,000¹⁰, cantonal minimums that are often higher, and a negotiated advance agreement.

• Private capital gains on securities are not taxed, unless reclassified as gainful activity.
• This reclassification is assessed on a body of indicators, with no predefined threshold.
• The cantonal wealth tax is the counterpart, and it hits the stock of wealth every year.
• Tax liability arises from 30 days² with gainful activity.
• Exit tax deferral is not automatic for a move to Switzerland.

For a large securities portfolio, the Swiss trade-off therefore comes down to two opposing parameters: the exemption of gains and the annual taxation of capital. Depending on the portfolio's turnover and yield, one or the other wins — and the calculation is done municipality by municipality, like every Swiss calculation.