What are Actively Managed Certificates and why are they a popular form of investment?

Actively Managed Certificates (AMCs) are structured financial instruments that allow investors to access a professionally managed, dynamically adjusted portfolio through a single, tradable security. They combine features of structured products and actively managed collective investment schemes, enabling asset managers to rebalance the underlying assets in response to market developments or strategic mandates. AMCs can have various asset classes as underlying assets and allow for flexible investment formulas, including a broad range of assets such as equities, bonds, commodities, real estate, digital currencies, and even private market investments within one instrument.

While investments in AMCs provide similar benefits to investments in collective investment schemes, AMCs offer several advantages compared to traditional collective investment schemes. Once issued, AMCs receive an ISIN and can be traded on secondary markets, providing liquidity for investors. They streamline portfolio management by reducing the number of transactions and administrative overhead. Finally, AMCs enable access to investment strategies and asset classes that are often reserved for institutional investors, but with relatively low minimum investment requirements.

How are AMCs with equities and commodities as underlying treated for income tax purposes?

The Federal Tax Administration treats AMCs for income tax purposes as collective investment schemes. Consequently, all distributions, payments, or discounts, as well as reinvested amounts, are treated as taxable income. If the issuer of the AMC prepares a Swiss tax report that separately accounts for capital gains, such capital gains are tax exempt for individual Swiss-resident investors.

However, there is a special treatment for AMCs that fulfil the following conditions:

• the shares included in the index or basket are selected and managed during the term of the certificate according to precisely defined and predetermined objective criteria (such as market capitalization, liquidity, P/E ratio, etc.),
• and these criteria are specified in the term sheet and remain unchanged during the term of the certificate.

If these two requirements are met, the AMCs are treated as passive basket or index certificates for tax purposes, meaning that any gains related to the certificates are treated as private capital gains and are tax exempt for Swiss individual investors. Only compensation payments and the original issue discount are treated as taxable income. Thus, capital gains do not need to be separately reported by the issuer.

How are AMCs with fixed interest instruments as underlyings treated for income tax purposes?

Such AMCs with fixed interest instruments as underlyings are treated for income tax purposes in Switzerland as investments in bonds. This means that any payment, such as interest or discounts, are considered taxable income. Private capital gains from the sale of such certificate are generally tax exempt.

Are there any special tax rules for AMCs with collective investment schemes as underlyings?

Yes, there are special tax rules for AMCs with collective investment schemes as underlyings. Such AMCs are treated as fiscally transparent investments for Swiss tax purposes, meaning that any taxable income generated at the level of the underlying collective investment scheme — including both distributed and accumulated income—is attributed directly to the investor and taxed as income. Capital gains realized by the underlying collective investment scheme are generally tax-exempt for private investors, provided they are reported separately or distributed with a separate coupon. This treatment applies regardless of whether the collective investment scheme is Swiss or foreign, and it ensures that the tax consequences for the investor reflect the actual income and gains generated by the underlying collective investment scheme.

How are AMCs treated for withholding and stamp duty purposes?

The Swiss withholding tax is deducted at a rate of 35% from taxable payments and can significantly reduce the yield of an investment. However, AMCs issued by Swiss issuers are generally not subject to Swiss withholding tax on distributions, payments, or discounts, except in the case of AMCs with fixed interest instruments (bonds) as underlyings or in cases of tax avoidance.

For AMCs with bonds as underlyings, if such an AMC is issued by a Swiss issuer, payments are subject to Swiss withholding tax.

Regarding Swiss stamp duty, AMCs on bonds are subject to stamp duty if they have a tenor of at least one year. Certificates with a shorter tenor (less than one year) are treated as money market instruments and are exempt from stamp duty. For AMCs with equities, commodities, or collective investment schemes as underlyings, the stamp duty treatment depends on the issuer: if the AMC is issued by a Swiss issuer, it is generally exempt from stamp duty. If issued by a foreign issuer, the Swiss stamp duty of 0.15% per counterparty applies when traded through a Swiss securities dealer (e.g. a Swiss bank).

Our experienced team at LINDEMANNLAW is ready to assist with Actively Managed Certificates, Swiss tax questions, and regulatory matters. Contact us today for clear, practical legal advice tailored to your situation.