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