Accumulating vs Distributing ETFs

A fund earns income from what it holds: dividends from shares and interest from bonds. A distributing fund pays that income out to you, once or several times a year. An accumulating fund keeps it and reinvests it, so instead of cash you own units that are each worth a little more. Swiss tax rules count a fund as distributing if each year it pays out at least 70% of its net income: its income after costs, plus any carried over from earlier years. A Swiss fund's rules must require it.

Many ETFs come in both versions, with the same holdings. The difference is what happens to the income.

Here's what each kind does with its income, for someone who lives in Switzerland, under the rules in force in 2026:

Only the first two rows differ. The tax is the same either way. The income is taxed in the year it's paid out or reinvested. A Swiss fund deducts 35% withholding tax from it, which you can reclaim. And the units count for wealth tax at their value at the end of the year.

Say you hold CHF 10,000 in a fund that earns CHF 200 of income in a year, after its costs. Here's where the money goes, depending on where the fund is based:

Whatever the fund, you declare CHF 200 as income. A Swiss fund withholds 35%, CHF 70: a distributing one pays you the other CHF 130, an accumulating one reinvests it. Either way you get the CHF 70 back by declaring the units and the income. An ETF based in Ireland or Luxembourg deducts no Swiss withholding tax, and nothing is deducted for the Irish or Luxembourg tax office either, so it pays out or reinvests the full CHF 200.

So the choice doesn't change your income tax. It changes two other things. With an accumulating fund, the tax on income you never received in cash comes out of other money, though from a Swiss fund the CHF 70 you reclaim helps. With a distributing fund, putting the money back to work means buying again, with a broker fee and, at a Swiss bank or broker, stamp duty on the purchase, unless you subscribe to new units of a Swiss fund.

Capital gains are a separate matter. For a private investor, the gain when you sell your units is generally tax-free. So are the gains the fund makes when it sells, if it shows them separately.

A fund's home country, its domicile in the words of a factsheet, decides which withholding tax applies. Many ETFs sold in Switzerland are based in Ireland or Luxembourg. What they pay out or reinvest carries no Swiss withholding tax, but it's taxed in your return just as a Swiss fund's income is. They lose tax in another way: when a fund receives dividends from abroad, many countries deduct their own withholding tax first, inside the fund, before anything reaches you. On dividends that US companies pay to a fund based in Ireland, the tax treaty between the two countries limits the US tax to 15%, if the fund qualifies for the treaty's benefits.

A Swiss fund generally can't use tax treaties in its own name. For a few countries, listed by the Federal Tax Administration, it can claim relief for the part of its income that belongs to its Swiss investors. For income from the other countries, the USA among them, only the investor can claim it.

The taxable figures come from the fund, which reports its income per unit to the Federal Tax Administration. If a foreign fund doesn't report and its annual accounts don't allow its income to be worked out, the cantonal tax office can estimate the income from a market return on the fund's assets, which needn't match what the fund actually earned.

And tax is rarely a reason to pick one kind over the other. For someone living in Switzerland the income tax is the same, so what's left is whether you want the cash, and what reinvesting it yourself would cost.