If I privately invest in shares of a startup, do I have to declare them to the tax authorities and if yes, how?
Shares of startups must be declared in the tax return as part of the wealth declaration (Wertschriftenverzeichnis/état des titres). You can either list each startup in a separate line of the official form or refer to an appendix (e.g. provided by investiere).

What kind of taxes do I have to pay as a private investor during the investment period and in case of a potential exit?
During the investment, you will have to pay annual wealth taxes based on the value of the investment per year-end. In addition, you will have to declare any dividends you received from the startup. In case of an exit, your capital gains should be tax-free.

There is mainly one exception: If the tax authorities can demonstrate that your investment activity has exceeded ordinary private investment, they could qualify you as a professional securities dealer (gewerbsmässiger Wertschriftenhändler/ négociants professionnel de titres). In practice, this mostly happens when you borrow money to finance your investments or if you trade very frequently. In case of doubt, you should consult with your tax advisor.

How do I know what a startup share is worth from a tax perspective?
There are published formulas available on how to value a startup for tax purposes. In practice, the startup should agree on the value with the tax authorities and then provide all shareholders with this information. Investiere will provide you with a summary of tax values. If you submit these values to the tax authorities, you have fulfilled your duties as a taxpayer. It is then up to the tax authorities if they challenge those values and ask for more information.

In the past, there have been some problems with startups with ridiculously high wealth tax valuations due to a recent financing round. Upon political pressures, new rules have been introduced that allow for a lower valuation for startups despite a recent funding round.

Is it possible that the tax valuation of the startup is lower than the amount invested?
Yes. since a startup incurs mostly expenses in the beginning and future profit expectations are not included in the tax valuation, the valuation in the first years might actually be lower than the original amount invested.

What is the difference between shares and convertible loans from a tax perspective?
Convertible loans can be rather complex from a tax perspective depending on the individual properties. Also, the interest component on a convertible loan is subject to income tax. Convertible loans should be evaluated by a tax specialist.

Most people that invest with investiere in startups do so as a private person, whereas about 1 person in 10 invests through an entity (AG or GmbH). What are the pros and cons of these two alternatives?
For most investors investing directly is beneficial in order to benefit from tax-free capital gains. However, there might be individual circumstances that justify the use of a company, in particular:

-The use of leverage or frequent trading causes the investor to become a professional securities dealer.

-The investor wants to use invested cash in an existing entity without paying dividends and reinvesting from a personal level.

Is it worth it to create an entity in order to invest in startups?
Typically, not unless there is a very specific benefit. In any case, investing via a company should always be accompanied by proper tax planning.

When do the Swiss tax authorities consider an investor as a “professional securities trader”?
This is a rather complex topic. The tax authorities have issued a circular (No 36) which can be found online, which gives some guidance on the criteria to be treated as a professional securities dealer. However, the criteria are very broad and often do not give a clear answer.

Typically, the use of leverage, financial derivatives, and frequent trading are indications that an investment activity exceeds ordinary private wealth management.

In private equity frequent trading is typically not an issue. Therefore, the most important rule is to avoid excessive leverage when investing in startups.

Do only Lombard loans qualify as the use of leverage?
Any type of loan could qualify as leverage (e.g. borrowing from family members or a mortgage on a house)

What are the implications of this assessment as a professional trader?
The result is that any income (including capital gains) are subject to income tax and social security contributions. This is a very unfavorable outcome for the investor.

How frequently do people get assessed as professionals?
In practice, the tax authorities do not apply the qualification often. However, there have been cases in the past where only a single transaction has led to qualification as a securities dealer. Hence, there is quite some uncertainty.

What can a person do if she’s unsure if the authorities might consider her as a professional trader?
It is possible to file an advance tax ruling prior to realizing a capital gain. However, the tax authorities are reluctant to grant a blanket confirmation. They will only assess a very specific facts pattern that is either a very clear case or give confirmation about a specific transaction.

What should a person do if she’s unsure about how to proceed in tax matters?
This mainly depends on the amount invested and the risk appetite. If one has only invested CHF 100’000, extensive tax planning is probably not worthwhile. However, if investments are considerable, a tax check-up or even a tax ruling might be advisable.

I would expect the cost for a check-up to be a few hundred francs and the costs of a ruling to start from CHF 3’500 for a simple case.

How did you get to know investiere?
I do not remember exactly. It was either through a news article or through online advertisement. I liked the idea of diversifying against the heavily correlated listed equity.