Is trading legal and taxed in Switzerland?

Buying and selling financial instruments with your own money, from Switzerland, requires no authorisation. You are not a financial service provider under FinSA: you are your broker’s client. No filing, no licence.

The line sits elsewhere, and it is a clear one. You cross it as soon as you act for someone else: managing a third party’s capital, even a relative’s and even for free, providing investment advice professionally, or issuing personalised recommendations. That falls within FinSA and FINMA supervision, with serious obligations attached.

That is precisely why, on this site, I do not sell signals, I manage no third-party capital and I give no personalised advice. Teaching a method and commenting on charts is training; telling someone what to buy with their money is a different, regulated activity.

One point that is often misunderstood: prop firm funded accounts change nothing in this analysis on the authorisation side. You are not managing client money, you are executing under a contract with a company that allocates capital to you. On the tax side, however, it changes a great deal, as we will see.

This is the Swiss quirk that surprises foreigners. For a private individual managing their own wealth, capital gains realised on movable assets — shares, bonds, and by extension other movable assets — are exempt from income tax. You sell for more than you paid: the gain is not taxable income.

The flip side is logical and often forgotten: private capital losses are not deductible. You cannot offset a bad year against your other income. The regime is symmetrical, both ways.

Do not confuse the capital gain with the income your holdings produce. Dividends and interest are taxable income, whatever your situation. The exemption covers the disposal gain, not the yield.

That exemption is not unconditional, and this is where active trading becomes a topic. If the tax authority considers your activity goes beyond managing your private wealth, it reclassifies you as a professional securities dealer. The consequences are substantial and cut both ways.

On the unfavourable side: your gains become income from self-employment, therefore taxable — federal, cantonal and communal — and subject to social contributions (AVS/AI/APG), which many people discover a year late with a back-payment attached.

On the favourable side, because there is one: your losses become deductible, and so do your business expenses (platform, market data, a share of your housing, training). For a consistently losing trader, professional status is arithmetically advantageous — which is obviously not the goal anyone is aiming for.

Reclassification is not something you apply for or choose: it is assessed, case by case, by your cantonal authority. And practice varies between cantons, which makes any general view — this one included — insufficient to settle your situation.

The Swiss Federal Tax Administration publishes a circular dedicated to professional securities dealing, Circular No. 36. It defines a safe harbour: if your activity meets all the criteria it lists, private wealth management is accepted outright and your gains stay exempt.

The criteria cover, in substance, five things: a minimum holding period for the securities sold; a transaction volume that stays in a reasonable ratio to your portfolio value at the start of the period; that your gains are not needed to cover your living expenses; that your investments are not debt-financed; and derivatives use limited to hedging your own positions.

Two important qualifications. First, the criteria work as a set: failing one does not automatically make you professional, but it takes your file out of the safe harbour, and the assessment becomes an overall one again. Second, the numeric thresholds and exact wording are in the text itself, and a circular can be revised: read it in its current version on the FTA site rather than relying on a summary.

For an active trader, two criteria stand out immediately: holding period and volume. An intraday style, by construction, puts both under strain. That does not mean you will be reclassified — but it does mean you are exactly the profile that should ask a professional beforehand, not afterwards.

Here is the most frequently overlooked point, and it bears directly on the approach I teach. When you are paid on a prop firm funded account, you are not realising a gain on your own wealth: the capital is not yours. You are receiving consideration under a contract.

The exemption for private capital gains, which by definition assumes the asset belongs to you, therefore has no reason to apply here. These payments have all the characteristics of income from an activity, and that is how you should plan for them — with the questions that follow: taxation as income, possible social contributions, and self-employed status if the activity becomes regular.

I put that in conditional terms deliberately. The tax treatment of prop firm payouts is a recent subject, practice is not uniform across cantons, and the classification may depend on the exact structure of the contract you sign. I am not aware of a published position that settles the question in general terms.

The practical conclusion is simple: do not assume that “trading is not taxed in Switzerland” applies to prop firm payouts. It is very probably wrong, and it is the kind of mistake that gets paid back with late interest.

Even if your capital gains are exempt, your portfolio is still an asset, and Switzerland levies a wealth tax at cantonal and communal level. It applies to the value of your holdings at the end of the tax period, not to your gains.

Counter-intuitive consequence: you can owe wealth tax in a year when your performance was poor, simply because the capital was there. Rates and allowances vary appreciably between cantons, and Geneva has its own practice.

In every case, your accounts — including with a foreign broker — must appear in your tax return, with the corresponding statements. Omitting an account is a problem of a different nature from the debate about how your activity is classified.

Keep a register from your first trade. Date, instrument, direction, size, result, and fees. You will need it for your tax return, and above all to answer if the authority takes an interest in your volume. Reconstructing two years of history after the fact is painful work and sometimes impossible.

Keep your annual broker statements, along with the contracts and payment records from your prop firms. Those documents are what will establish the nature of your income, not your interpretation of it.

And ask the question beforehand, not afterwards: an appointment with a fiduciary or a call to your cantonal tax office costs little against a back-assessment with retroactive social contributions attached. If your style is intraday, or if you anticipate regular prop firm payouts, that is not excessive caution, it is the normal step.

None of the above is tax advice, and I am not a tax adviser. The general framework is as described here; your situation depends on your canton, your style, your other income and your contracts. Only a qualified professional can answer for you.