Taxes on Bonds

[savedlongs]

Dear all,

I'm new (and young) in the Investment field and therefore have some issues to understad the different details related to taxation.

I tried to read different posts in this amazing forum (thanks to all the contributors!) but I don't get fully the concepts therefore I hope you can provide me a better overview.Let's use some examples:

1. I have some Pounds and therefore considering this Bond XS1859424902 (domiciliate in USA and currency in pounds). How can I see in ICTax the % and the value of tax per year if I buy 1000 Pound?
2. What if the Bond is NOT in ICTax? is there a rule of thumb I can consider?
3. Have Corporate bonds and Goverment bonds different taxation criterias?
4. Is a Zero Coupon Bond taxable for capital gain? Example: one Bond is issued in 2023 at 100, in 2024 goes to 80 and I buy it. The Bond expire in 2025 where will achieve again 100. Will I pay capital gain when the Bond expire?
5. Same as point 4 but what if the Bond is not a zero coupon? How can I calculate the overall taxation? maybe as an example again XS1859424902
6. For tax purpose, should I also consider the domicilie of the Bond? Where is the best domicile (Switzlernad and USA only?) If for example, the domicile of the bond is in Italy, should i consider the additional taxation in Italy?

https://preview.redd.it/15hgi6l5vex...bp&s=12771a8715a21bbc49a36329554ea8261a3704e0

Thank you all for the help. Really appreciated.

 

[tobiahjude99]

@savedlongs In general you can summarize all your questions in two answers:

Any coupon payment is taxed as income, period. No matter the source, no matter the domicile etc.

Zero coupon bonds are taxed as capital gains, and I would advise against buying any. They are tax inefficient and I dont know how you would handle them in a tax declaration.

Some old longer bonds that lost a lot of value, due to the rise in interest raste, and that have low coupons are pretty good tax wise now, because their price appreciation is tax free.

 

[savedlongs]

@tobiahjude99 So a rule for tax efficiency is to buy Bonds with low coupon and wait until they expire (achieve par value). Interesting

 

[tobiahjude99]

@savedlongs Pretty much, and it‘s basically only possible now, as we are coming out of a long stretch of very low interest rates and many bonds with these super low coupons existing, that are also currently priced very low. Pretty unique situation.

 

[savedlongs]

@tobiahjude99 I will further investigate on these Bonds then

 

[smta276603]

@savedlongs To your question no. 2

What if the Bond is NOT in ICTax? is there a rule of thumb I can consider?

You write them an email and they will add it in just a few days. Ideally write them ahead of time, not at the tax deadline.

 

[savedlongs]

@smta276603 thanks for your suggestion

 

[letthrmusixsaveyourlife]

@savedlongs You make it all to complicated the system is easy.

Declare everything, don’t get taxed(declaration is needed to get witholding tax back)
Everything there is no threshold

It doesn’t matter if a bond, ETF, car or watch..
The value at 31.12 matters and dividends.

The only thing which changes is the witholding tax and how you can get a return.
Swiss domicil is most straight forward.

 

[savedlongs]

@letthrmusixsaveyourlife the reason why I make too complicated it's because I'm just starting with Bonds. But thanks for your hint

 

[savedlongs]

Maybe one last question: from ICTax, where do I see the tax I should pay? If I consider the Bond XS1859424902 (which is in ICTax) I don't understand the value (or %) that i should pay

 

[tobiahjude99]

@savedlongs At the very bottom right, there is the value that is considered income. This is taxed as any other regular income. If your marginal tax rate is 25% for example, that would mean 34.791 x 25% = 8.7 CHF effective tax.

 

[savedlongs]

@tobiahjude99 Ah ok now i get it.

The % depends on my marginal tax rate. I thought it's a fixed % for everyone