1. Overview of Investment Income Under Federal Law

For individuals, the Direct Federal Tax captures a broad range of investment returns, y compris :

• intérêt on bank accounts, bonds and loans,
• dividendes and profit distributions from companies,
• distributions from collective investment schemes (funds),
• income deemed to be interest (for example from certain structured products),
• selected insurance-related investment returns.

In contrast, many private capital gains on the sale of movable assets (e.g. shares held as private investments) are not subject to federal income tax, provided the individual is not classified as a professional securities trader.

2. Interest Income

Interest income is generally fully taxable at federal level for Swiss tax residents. This includes:

• les intérêts sur Swiss and foreign bank accounts,
• interest from bonds and debentures,
• interest from private loans to individuals or companies,
• interest components of certain structured products and savings plans.

Taxable interest is usually recognised when it is credited or becomes due to the investor, based on bank and custody statements.

3. Dividends and Participation Income

Dividends and similar income from equity participations are also taxable at federal level. This includes:

• ordinary dividends from Swiss and foreign companies,
• bonus shares and certain distributions cachées de bénéfices,
• distributions from cooperatives,
• certain capital repayments that do not qualify as repayment of recognised capital contribution reserves.

3.1 Partial taxation of qualifying participations

For individuals holding qualifying shareholdings (e.g. significant direct participations in a company), the DBG may provide partial relief by taxing only a portion of the dividend at federal level. The aim is to reduce economic double taxation of corporate profits.

3.2 Repayment of capital contribution reserves

Distributions from recognised capital contribution reserves can in many cases be treated as tax-free capital repayments, rather than taxable dividends, if they meet strict legal criteria. Correct classification on the dividend statement is essential.

4. Funds and Collective Investment Schemes

Suisses et étrangers collective investment schemes (funds) often distribute a mix of:

• imposable revenus des investissements (interest, dividends, other income), and
• capital gains realised inside the fund.

Under Swiss federal law:

• les income portion of fund distributions is taxable,
• les capital gains portion is usually tax-free for private investors,
• fund reports and tax reporting (e.g. Swiss tax values) are used to distinguish the two.

4.1 Accumulating vs. distributing funds

Pour accumulating funds (no cash distribution), taxable income may be deemed to be distributed and must still be declared, based on the fund’s annual tax reporting.

5. Structured Products and Derivatives

The tax treatment of structured products and derivatives depends on their economic profile. Typical elements include:

• a fixed income component (taxable interest or income), and
• a capital component (potentially tax-free private capital gain upon sale or redemption).

The Swiss Federal Tax Administration often issues tax rulings and practice guidelines on specific product types. Investors should rely on bank tax reports and, where needed, professional advice when dealing with complex instruments.

6. Foreign Investment Income and Foreign Tax Credits

Swiss tax residents are generally taxable on their worldwide investment income at federal level, including:

• foreign dividends,
• foreign interest,
• income from foreign funds and structured products.

However, foreign-source income is often subject to withholding tax abroad. To avoid double taxation:

• Swiss federal law and conventions de double imposition may grant a crédit d'impôt étranger, ou
• apply the exemption avec progression method in certain cases.

6.1 Conditions for foreign tax credits

Foreign tax credits are usually limited to:

• taxes covered by the relevant treaty,
• the portion of Swiss federal tax attributable to the foreign income,
• properly documented withholding taxes (e.g. official tax vouchers).

7. Borderline Between Investment Income and Capital Gains

A central feature of Swiss federal tax is that many les plus-values privées sur biens meubles are tax-free, whereas revenus des investissements is fully taxable. Distinguishing the two is therefore crucial.

Common borderline issues include:

• classification of share buy-backs and partial liquidations,
• treatment of bonus shares or stock dividends,
• separation of interest vs. capital gain in structured products,
• cases where high trading activity may reclassify a private investor as a professional securities trader.

7.1 Professional securities trader risk

If an individual is considered a professional trader, capital gains may become taxable as ordinary income, but trading losses and expenses can become deductible. The classification is based on factors such as holding period, leverage, volume and reliance on trading as a primary income source.

8. Link to Swiss Withholding Tax (Verrechnungssteuer)

Much Swiss investment income is subject to Swiss withholding tax at source, particularly:

• dividendes from Swiss companies,
• interest and income from certain Swiss bonds and funds,
• some insurance-related investment payments.

For Swiss residents:

• withholding tax is refundable if the income and assets are correctly declared,
• the refund is granted via credit against federal and cantonal income tax or as a cash refund,
• non-declaration can lead to loss of refund rights and penalties.

The mechanics of withholding tax are covered in detail in the separate guide on Impôt suisse à la source (Verrechnungssteuer).

9. Deductions for Investment-Related Expenses and Interest

At federal level, individuals may deduct:

• reasonable custody fees and account charges, depending on practice,
• debt interest on loans used to finance investments, subject to overall limits,
• selected other investment-related expenses, where treated as allowable deductions.

The total deduction for private debt interest is limited and typically cannot exceed:

• taxable investment income plus a small additional percentage of net assets (according to DBG rules).

Detailed deduction rules are discussed in the guide on Déductions fiscales fédérales.

10. Cantonal Aspects and Overall Burden

While the definition of investment income is largely harmonised between federal and cantonal law, the overall tax burden on investment income varies significantly by canton due to:

• different cantonal income tax rates and multipliers,
• cantonal approaches to déductions for custody fees and interest,
• cantonal impôt sur la fortune on the underlying assets.

For comparison of cantonal environments, see: Impôt suisse sur le revenu par canton .

11. Practical Points for Investors

To correctly manage federal taxation of investment income, individuals should:

• retenir annual bank and custody statements (including tax reports),
• ensure that all accounts and portfolios, Swiss and foreign, are declared,
• check that withholding tax credits and foreign tax credits are correctly claimed,
• review the classification of special transactions (e.g. share buy-backs, structured products),
• monitor trading behaviour to avoid unintended classification as a professional trader.

12. Prochaines étapes et guides connexes

Investment income interacts with several other components of the Swiss Direct Federal Tax. For a complete analysis, you should also review:

• Revenu imposable selon le droit fédéral suisse – overall income categories,
• Revenus exonérés et non imposables – in particular private capital gains,
• Déductions fiscales fédérales – interest and cost deductions,
• Impôt suisse à la source (Verrechnungssteuer) – prepayments and refunds,
• Aspects fiscaux internationaux et conventions de double imposition – foreign investments and credits.

Ensemble, ces guides fournissent une practical, English-language framework for understanding the federal taxation of investment income en Suisse.