Professional Securities Dealer

Preliminary Remarks

Capital gains being generated by an individual who has a business activity are not income tax free. The sale of Investments can be considered as such business activity. This is determined under the circumstances of each individual case and the below criteria, whether a  self-employed activity exists (i.e. an activity of professional securities dealer). In any case, the tax authorities do not consider that a professional securities trading is given if the following five criteria are met(see also, Circular No. 36 of the FTA dated 27.07.2012, para. 3):
  • The holding period of the securities is of at least 6 months;  
  • The transaction volume (sum of all purchase prices and sale incomes) per calendar year amount to a total of not more than five times the securities portfolio and credit balance at the beginning of the tax period;    
  • The achievement of capital gains from securities transactions create no need to replace missing or ceasing income for standard of living. This is generally the case when the realized capital gains constitute less than 50% of the net income of the tax period; 
  • The investments are not debt financed or the taxable income from investment (such as interest, dividends, etc.) are greater than the share of debt interest; and      
  • The purchase and sale of derivatives (especially options) is limited to the protection of own securities positions.   
Professional securities trading cannot be excluded if these conditions are not cumulatively met. 

Jurisprudence

Please refer to the German version.

Practice of Tax Authorities

Please refer to the German version.

Literature

Please refer to the German version.

Miscellaneous

Tax consequences

Profits deriving from private wealth management shall be taxed as income from self-employment according to Art. 18 FITA, if the activity is qualified as a professional securities trading activity by the tax authorities. 

In addition, social security contributions (AHV, IV, EO) of approximately 10% must be paid.

Draft in the Federal Law on improvement of the tax environment for business activities and investments (Corporate Tax Reform Act II)  

The entire draft is available following this link: Draft Corporate Tax Reform Act II (German) 

The Swiss parliament could not agree on a solution and abstained from specific legislation in the framework of the Corporate Tax Reform II. The wording of the draft proposal was as follows:

Art. 18 para. 2bis FITA (new) 
2bis Capital gains from securities, which are not functionally related with business operations of a taxable person, constitute only income from self-employment if:  
    a.     the securities that are at least 20% debt financed were acquired and were not more than five years part of the property of that person; or 
    b.     the annual sales proceeds are of at least CHF 500,000 and the existing securities assets as the beginning of the tax year were in terms of value handled at least twice. 


Art. 8 para. 2bis CCITHA (new)
2bis Capital gains from securities, which are not functionally related with business operations of a taxable person, constitute only income from self-employment if:  
    a.     the securities that are at least 20% debt financed were acquired and were not more than five years part of the property of that person; or 
    b.     the annual sales proceeds are of at least CHF 500,000 and the existing securities assets as the beginning of the tax year were in terms of value handled at least twice.

Federal Council accompanying report in proposed legislation about the Federal Law on improvement of the tax environment for business activities and investments (Corporate Tax Reform Act II)

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