Tax guide
Bonds · Interest · Zero-coupon bonds · Floating-rate bonds · Accrued interestSwiss bonds held by German residents
Anyone who is tax resident in Germany and holds Swiss bonds must assess ongoing interest payments, sales, repayments and, where applicable, Swiss withholding tax under German tax rules. Depending on the instrument, fixed-rate bonds, floating-rate bonds, zero-coupon bonds, discount bonds and structured debt securities can differ considerably in how they work economically. For tax purposes, however, they are generally treated as debt claims under section 20 of the German Income Tax Act (EStG).
General principle
Germany generally treats a bond as a debt claim
For residents of Germany, income from Swiss bonds is generally subject to German taxation. Ongoing interest payments are generally treated as investment income.
A gain or loss arising from the sale, redemption or repayment of a bond may also be relevant for tax purposes. The decisive factor is not merely the product’s name, but its economic and legal structure.
Where the bonds are held in a Swiss securities account, German investment income tax is generally not fully withheld by the foreign bank. The relevant amounts therefore often need to be calculated separately for the German income tax return.
Tax treatment
Record coupons, price gains and repayments separately
A bond may involve several components for tax purposes. Particularly with foreign securities accounts, the review should extend beyond the amount labelled “interest income” by the bank.
- Ongoing interest payments
- Accrued interest on purchase or sale
- Gain or loss on disposal
- Gain or loss on repayment
- Exchange-rate effects in the euro calculation
- Foreign withholding tax, including Swiss withholding tax
Types of bonds
Not every bond pays interest in the same way
Fixed-rate bond
The coupon is set in advance for the bond’s term or for a specified period. Coupons paid are generally treated as ongoing investment income for tax purposes.
Floating-rate bond
The interest rate is reset periodically, for example by reference to a benchmark rate plus a margin. Taxation is based on the interest payment actually received.
Zero-coupon bond
There is generally no ongoing coupon. The return mainly arises from the difference between the acquisition price and the repayment amount or sale price.
Discount bond
The bond is issued below its repayment amount and may also carry a low coupon. The interest component and the price component must be clearly distinguished.
Ongoing interest payments
Fixed and variable coupons are taxed when received
For a conventional Swiss bond, the ongoing coupon is generally recognised as investment income. Whether the interest rate is fixed or variable does not, in itself, change this basic treatment.
Fixed coupon
Example: 3% per year on a nominal amount of CHF 100,000. The annual interest payment is recognised as investment income in the year it is received.
Variable coupon
Example: SARON or another reference rate plus a fixed margin. The relevant amount is the interest component actually determined and paid.
The Swiss bank report is only a starting point
The German tax return must use income amounts determined under German law. Labels or tax categories in the Swiss bank report do not necessarily match the German classification.
Zero-coupon bonds
The return on a zero-coupon bond is typically realised on sale or repayment
A zero-coupon bond generally makes no ongoing coupon payments. Instead, the economic interest return is reflected in the difference between the lower acquisition price and the higher sale price or repayment amount.
German taxation therefore generally focuses on the realised difference. This may arise when the bond matures or when it is sold before maturity.
| Feature | Fixed-rate bond | Zero-coupon bond |
|---|---|---|
| Ongoing payments | Regular coupon | Generally no ongoing interest payments |
| Source of return | Coupon plus any price gain | Mainly the difference between purchase price and sale proceeds or redemption amount |
| Timing of taxation | Coupon when received; price gain when realised | Generally on sale or repayment |
| Accrued interest | Typically relevant | A pure zero-coupon bond generally has no conventional accrued-interest settlement |
Accrued interest
Buying or selling between two interest payment dates
When a conventional bond is transferred between two coupon dates, the buyer often compensates the seller for the interest accrued since the previous interest payment date. This amount is known as accrued interest.
For the seller, accrued interest received generally constitutes investment income relevant for tax purposes. For the buyer, accrued interest paid is taken into account as negative investment income under German rules.
Keep accrued interest separate from the purchase price
Swiss securities transaction statements should be checked to establish whether accrued interest is shown separately. For German tax purposes, it is generally treated differently from the purchase price of the bond itself.
Sale and redemption
Repayment at maturity can also trigger a taxable gain
A stock exchange sale is not the only relevant event for a bond. Redemption and repayment are also generally treated as a disposal for the purposes of section 20 EStG.
For example, if an investor purchased a bond below par and receives 100% of its nominal amount at maturity, the difference between the acquisition costs and the repayment amount may constitute taxable investment income.
Sale before maturity
Sale proceeds less acquisition costs and directly attributable expenses generally determine the taxable gain or loss.
Repayment at par
Repayment at 100% of nominal value can still produce a gain if the bond was previously purchased for less than 100%.
Price loss or default
Losses on debt claims can generally be taken into account within the investment income tax framework. In cases of default or worthless claims, the specific circumstances of loss realisation must be examined.
Foreign currency
CHF bonds must be calculated in euros for German tax purposes
For a bond denominated in Swiss francs, calculating the gain or loss solely in CHF is not sufficient. For German tax purposes, the acquisition, interest receipts, sale and repayment must be valued in euros.
Exchange-rate movements can therefore increase or reduce the investment gain taxable in Germany, even if the bond’s price in CHF has remained unchanged.
Currency gains often form part of the investment gain
For a debt claim denominated in a foreign currency, the taxable gain on disposal or repayment is derived from the acquisition costs and disposal proceeds determined in euros.
Special types of bonds
Convertible bonds, CoCos and structured debt securities require a separate review
Not every investment labelled a “bond” is a straightforward fixed-interest debt claim for tax purposes. Additional rights, conversion mechanisms or derivative components may affect its classification.
Convertible bonds
In addition to the entitlement to interest, there is a right or obligation to convert the bond into equity. Acquisition, conversion and the subsequent shareholding must be considered separately.
Contingent convertible bonds
Certain events may trigger conversion or loss absorption. The specific product structure is decisive.
Structured notes
Where repayment is linked to share prices, indices, commodities or other underlying assets, a more detailed tax analysis may be required.
Swiss withholding tax
Interest on Swiss bonds may be subject to Swiss withholding tax
Swiss withholding tax may apply, in particular, to interest on certain bonds issued by Swiss-resident issuers. The statutory withholding tax rate is generally 35% of taxable investment income.
For a resident of Germany, it is then necessary to determine which portion Switzerland may retain under the Germany–Switzerland double taxation agreement, which portion can be reclaimed and which remaining amount is creditable in Germany.
A 35% deduction does not mean a final tax charge of 35%
The gross amount withheld is not automatically the amount creditable against German tax. Entitlements to a refund from Switzerland must be taken into account before determining the German tax credit.
German tax return
Swiss bonds generally need to be reported in Anlage KAP
Where Swiss bonds are held with a foreign custodian bank, German investment income tax is often not fully withheld. Ongoing interest, accrued interest and gains on sale or repayment therefore generally need to be reported through the German income tax assessment process.
Anlage KAP
Interest, gains and losses from foreign bonds are generally reported within the investment income category.
Foreign tax
Swiss withholding tax must be reviewed for potential refunds and creditability against German tax.
Supporting documents
Retain purchase statements, coupon statements, sale and redemption records, and bank tax reports.
Keep complete Swiss bank records
Historical acquisition costs, accrued-interest details, foreign-currency amounts, withholding tax and the exact product name or ISIN are particularly important.
Product distinctions
A bond is not the same as a fund, ETF or certificate
Direct bond investment
A direct claim against the issuer. Generally treated as a debt claim under section 20 EStG.
Bond fund or bond ETF
An investment fund unit rather than a direct investment in individual bonds. The German Investment Tax Act generally applies.
Certificates and notes
Debt securities with particular repayment mechanisms. Their specific structure determines the tax treatment.
Frequently asked questions
Swiss bonds held by German residents
How is interest from a Swiss bond taxed in Germany?
Does it make a tax difference whether the coupon is fixed or variable?
How is a zero-coupon bond taxed?
What is accrued interest?
Is repayment of a bond tax-free if it is repaid only at face value?
What applies to a CHF-denominated bond?
Is Swiss withholding tax charged on interest from Swiss bonds?
Does a bond ETF receive the same treatment as a directly held bond?
Further reading
Swiss interest income and investments
Germany–Switzerland tax advice
Do you hold Swiss bonds while living in Germany?
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