Tax deduction of asset management costs

You can deduct asset management costs from your taxes. However, it is not always clear which costs for the management of securities are deductible and which are not. In this article, we try to shed some light on the subject.

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Which asset management costs can I deduct from my taxes and which cannot?

In principle, it is relatively simple. Custody costs are tax-deductible, transaction costs are not.

The following costs are also not deductible:

• Costs for financial, investment and tax advice
• Costs for completing the tax return / securities register
• Credit card fees / Card fees
• Costs for payment transactions
• etc.

These costs are either not absolutely necessary for simple asset management (e.g. advice), or have nothing to do with it at all and are therefore to be categorised as general living expenses (e.g. payment transactions).

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What is the situation with asset management mandates?

Where it becomes more difficult is with asset management mandates. The expenses of asset managers cannot be clearly allocated to one or the other type of expenditure. On the one hand, the purpose of asset management is to hold securities in safekeeping, but on the other hand, purchases and sales of securities are also carried out.

Lump-sum asset management costs can therefore generally not be deducted unless it can be proven that they have been divided into deductible and non-deductible costs.

• Active vs. passive asset management: Some cantons differentiate between active and passive asset management, whereby expenses for passive asset management can be deducted from taxes, whereas management fees for active portfolio management cannot. It is difficult to say when passive asset management ends and active asset management begins.
• Performance-oriented vs. non-performance-oriented asset management: This distinction can also be seen to mean the same thing as active or passive asset management. Performance-oriented asset management is active and aims to increase assets through active intervention.
• Performance-related vs. non-performance-related asset management: One canton (Aargau) distinguishes between performance-related and non-performance-related asset management, whereby only the costs for non-performance-related asset management can be deducted. [Note: This is probably an editorial error. We suspect that “success-orientated” is meant rather than “success-dependent”].

Because flat-rate asset management fees are generally not deductible, finpension has decided to split the fees for the investment solution into a custody account fee and an asset management fee. External asset managers who do not charge the account and custody account fees themselves cannot split the fees. finpension can, thanks to its higher FINMA licence as an account-holding securities firm.

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What is the maximum deduction for asset management costs?

There are two ways:

• You can either provide evidence of the actual costs you have incurred in connection with the management of your private assets,
• or you calculate the deduction on the basis of the percentage flat rates set by the canton.

In the case of actual costs, you must be able to prove that they are deductible, which is hardly possible, especially in the case of flat-rate asset management fees or portfolio management fees.

In order to be able to claim a deduction, corresponding income is required. Or to put it another way: without income, there is no deduction. This means that anyone who has no income and lists it in the securities register on their tax return cannot claim any custody account fees. And anyone who wants to claim custody account fees can only deduct them to the extent that they do not exceed the income.

But don’t worry too much about this. The tax declarations contain appropriate provisions to ensure that the deductions cannot exceed the income. Negative income from securities is therefore not possible. After deduction of administration costs, the income is always at least zero francs.

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Fees for safe deposit boxes, safes and vaults

Fees for safe deposit boxes are actually deductible. However, if only assets that do not generate taxable income are stored in the safe deposit boxes, deductibility is questionable.

Some cantons expressly state that no deduction is possible for fees for safe deposit boxes in which assets such as jewellery, precious metals or cash are stored. As already mentioned, the reason for this is that these assets do not generate any income.

With regard to cash, however, the fees for safe deposit boxes can be compared to negative interest, which is why it could be argued that these are also deductible (see next chapter).

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Account management fees / negative interest

Negative interest can be deducted in all the cantons analysed. The situation is less uniform for account management fees. In certain cantons they can be claimed, in others not.

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What should you do if you are unsure?

If you are unsure, it is better to deduct more than less. The tax authorities will then look at it and make the change if a deduction is not possible after all.

It is important that you look at the final tax bill and check what changes have been made by the tax authorities and whether you agree with these changes. If not, it is best to ask how this came about. If you still disagree with the tax authorities, you can always take legal action.

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What is the situation with pillar 3a?

As returns generated in pillar 3a do not have to be taxed as income, no deductions for fees can be claimed.