Capital gains on privately held assets are generally considered tax-free in Switzerland.
However, when it comes to bonds, this principle does not always apply without exception.
If a bond is issued in such a way that there is a difference between the issue price and the redemption amount, this difference does not qualify as a tax-free capital gain but rather as taxable one-time interest.
🌐 What to watch out for:
– Is the interest paid periodically or at maturity
– Was the bond issued below or at par
– When does the income accrue
– Who holds the bond at maturity
– How is the yield structured
Three structures – three different tax consequences:
🔹 Straight bonds
These are typically issued and redeemed at par. The return on the invested capital consists of regular, fixed interest payments during the term.
These interest payments are subject to income tax and withholding tax. Swiss investors may fully reclaim the withholding tax, provided the income is properly declared.
🔹 Discount and zero-coupon bonds (typical zerobonds)
There are no periodic interest payments; the full return is paid as a lump sum upon redemption — the difference between the issue price and the redemption amount.
For tax purposes, these bonds are considered to have predominantly one-time interest, or IUP (intérêt unique prédominant).
This one-time interest is subject to income tax and withholding tax.
🔹 Mixed discount or zero-coupon bonds
These combine periodic interest payments with an additional one-time compensation at maturity.
Whether and when this one-time interest is taxable depends on whether the bond qualifies as predominantly one-time interest (IUP):
– If it qualifies as IUP, the entire difference between purchase and redemption is subject to income tax - even in case of sale prior to maturity.
– If there is no IUP qualification, the one-time compensation is taxed exclusively in the hands of the final holder upon redemption. (In short: the last one gets bitten.)
This means: always consult the official ESTV securities list to check whether the bond qualifies as IUP.
If there is no indication, it is assumed that the bond does not qualify as IUP. In any case, advance clarification with the competent tax authority is strongly recommended.
⚠️ Please note:
Even though the basic tax rules are set at federal level, cantonal differences may apply - especially for the income taxation of mixed bond structures.
📣 Uncertain how a specific bond is taxed? Reach out now and get clarity.
💡 Stéphanie Fuchs Consulting – keeping you in the driver's seat with your taxes