The case

When you are an investor domiciled in Switzerland, it is important to understand the tax implications of investments in ETFs (exchange-traded funds) and index funds. Taxation also depends to a large extent on the fund’s domicile.

Source: Laws, regulations and practice & VZ VermögensZentrum Newsletter June 2025

The commentary

Assets invested in ETFs and index funds are subject to wealth tax, and the tax rates vary, depending on the canton and place of residence and range from 1.3 ‰ to 10.1 ‰. It is important to point out that for private investors capital gains are not taxable and it is equally important to mention that price losses are not deductible from taxable income.

Income in the form of dividends or interest payments is subject to income tax, and it is irrelevant whether the ETF or index fund distributes or reinvests (accumulates) the dividend or interest income. The accumulating fund must report the accrued income separately, which is generally the case for ETFs listed in Switzerland. The taxable income can be found on the price list of the Swiss Federal Tax Administration.

Income from ETFs domiciled in Switzerland is subject to a withholding tax amounting to 35 %, i.e. only 65 % of the gross income are distributed to investors. The investor must reclaim the withholding tax deducted by declaring it in the tax return. In the case of ETFs domiciled in Ireland or Luxembourg, which are much more widespread in Switzerland, the distributions are paid out in full to the investor without deduction of withholding tax.

Just like any the investor, the ETF itself must also pay 35 % withholding tax on the income. In the case of ETFs domiciled in Ireland or Luxembourg, for example, this only applies to income on Swiss securities held by the ETF, but because these ETFs are not domiciled in Switzerland, they are not entitled to reclaiming the withholding tax. For this reason, investors in Swiss investments are advised to choose ETFs domiciled in Switzerland. Assuming a dividend payout of 3 % on Swiss shares, foreign ETFs generate a lower return of up to 1 % per year compared to Swiss ETFs due to the fund domicile.

Many countries also have a withholding tax on interest and dividends that is comparable to the Swiss withholding tax, so the choice of fund domicile should also be taken into account when investing in an ETF on foreign stocks. For funds on global equities, the fund domicile Ireland is recommended for Swiss investors with regard to the withholding tax issue because Ireland has concluded many double taxation agreements and the withholding tax is partially refunded.

The Federal Tax Administration also levies a stamp duty, which is levied on the purchase and sale of ETFs and index funds and it varies, depending on the fund domicile, transaction type and fund type. Index funds tend to be taxed more favourably than ETFs and Swiss funds are also tax-favoured: Investors pay a tax rate of 0.075 % when buying or selling a domestic ETF. At a rate charged at 0.15 %, foreign ETF transactions cost twice as much.

The fund domicile is also important for index funds: while the purchase and sale of an index fund with a domestic domicile is tax-free, the stamp duty on the purchase of an index fund with a foreign domicile is 0.15 %. No stamp duty is levied on the sale of a foreign-domiciled index fund.

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