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Old 14.12.2015, 02:33
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Inheritance of land and Capital Gains

I while ago I inherited a small plot of land, a part of a larger plot passed on from my grandparents and shared between several siblings, aunts, uncles, cousins etc.

We didn't think much of it for a while, it was situated in a green belt, and was too small for farming. However in the last couple of years we were approached by a developer looking to use the land to build a new sports ground as part of a larger deal where another sports ground will be developed for housing. It looks like planning approval is going through and we've had a lot of backing from the developers to make things go through smoothly with planning permissions and such.

As such, the land has raised substantially in value, to the extent that my other family members face capital gains tax on the sale. AFAIK, there's no escaping the taxman on these things, even though I'm in Switzerland, am I liable for tax, and if so, how do I go about declaring it?
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Old 14.12.2015, 02:49
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Re: Inheritance of land and Capital Gains

The capital gains tax on land (Grundstückgewinnsteuer) for Ct. Luzern is based on how long you've held the property and the amount of the gain. This brochure explains the details including completing the tax filing:

https://steuern.lu.ch/-/media/Steuer...g.pdf?la=de-CH

This calculator will estimate the amount of the tax:

http://interface2.lu.ch/steuerkalkulator/ggst.aspx
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Old 14.12.2015, 02:57
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Re: Inheritance of land and Capital Gains

Crap, gonna have to get my translation on, I take it that applies for land inside and out of Switzerland?
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Old 14.12.2015, 03:15
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Re: Inheritance of land and Capital Gains

If I understand you correctly, the land is outside Switzerland -- is that correct?
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Old 14.12.2015, 03:26
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Re: Inheritance of land and Capital Gains

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Crap, gonna have to get my translation on, I take it that applies for land inside and out of Switzerland?
I am now suspecting that this land is outside of Switzerland and not in Ct. Lucerne as I assumed. To the extent that Switzerland has a tax treaty with this other country, Switzerland will not tax the capital gain:

"Im internationalen Verhältnis gilt mit allen Staaten, mit denen die Schweiz ein Doppelbesteuerungsabkommen abgeschlossen hat, dass das Besteuerungsrecht für Zuwachsgewinne bei Verkauf einer Immobilie dem Staat zugewiesen wird, in dem die Immobilie liegt."

http://www.meng-partner.ch/fileadmin...enschaften.pdf
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Old 14.12.2015, 15:24
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Re: Inheritance of land and Capital Gains

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If I understand you correctly, the land is outside Switzerland -- is that correct?
Yep, the land is in England
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Old 14.12.2015, 15:27
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Re: Inheritance of land and Capital Gains

Non-doms now get taxed on capital gains from properties, based on the value from April 2015.

https://www.gov.uk/guidance/capital-...ntial-property

The Swiss will just tax you on your net worth. Of course, you should have declared the ownership of the land in your past tax years, which I'm sure you did...

That said, I didn't spot if the link above refers to land or property. I guess the two are synonymous, but you never can be too sure.

Correction:

"What isn’t residential property
- building land, provided no residential building is under construction - this doesn’t include disposals of rights to acquire UK residential property ‘off plan’"

So you may be in the clear.
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Old 14.12.2015, 15:49
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Re: Inheritance of land and Capital Gains

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Non-doms now get taxed on capital gains from properties, based on the value from April 2015.

https://www.gov.uk/guidance/capital-...ntial-property

The Swiss will just tax you on your net worth. Of course, you should have declared the ownership of the land in your past tax years, which I'm sure you did...

That said, I didn't spot if the link above refers to land or property. I guess the two are synonymous, but you never can be too sure.

Correction:

"What isn’t residential property
- building land, provided no residential building is under construction - this doesn’t include disposals of rights to acquire UK residential property ‘off plan’"

So you may be in the clear.
Non residents, not Non Doms who are in fact residents in the Uk.

The U.K. Definition of domicile has no bearing on where you live.
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Old 14.12.2015, 16:00
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Re: Inheritance of land and Capital Gains

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The Swiss will just tax you on your net worth. Of course, you should have declared the ownership of the land in your past tax years, which I'm sure you did...
Ahem, nope.... TBH, as I said before, we all thought it was pretty much worthless. I would get a couple of quid a year from some legacy rent on it.

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Non-doms now get taxed on capital gains from properties, based on the value from April 2015.
That's interesting, it caught us (the inheritors) all by surprise and we're currently looking into working out the previous value when we inherited it, but would I only need lo declare it's value as of April 2015?

I guess technically it's working out when the value would have increased. Would it be when we got the planning approval? or did it raise as soon as the developer approached us with the proposal. The latter would have happened before April 2015, the former, before.

We do already have a lawyers negotating the deal and sorting out things link land registry, but they're not looking into international money transfers.
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Old 14.12.2015, 16:07
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Re: Inheritance of land and Capital Gains

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Ahem, nope.... TBH, as I said before, we all thought it was pretty much worthless. I would get a couple of quid a year from some legacy rent on it.



That's interesting, it caught us (the inheritors) all by surprise and we're currently looking into working out the previous value when we inherited it, but would I only need lo declare it's value as of April 2015?

I guess technically it's working out when the value would have increased. Would it be when we got the planning approval? or did it raise as soon as the developer approached us with the proposal. The latter would have happened before April 2015, the former, before.

We do already have a lawyers negotating the deal and sorting out things link land registry, but they're not looking into international money transfers.
Well if there was no planning permission & little chance of getting it before, then the rise in value is recent. Until a sale takes place any value is opinion & not fact. The probate value is a good starting point, if you claim the value was higher at death then IHT of 40% ma be payable. CGT is 18/28%
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Old 14.12.2015, 16:46
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Re: Inheritance of land and Capital Gains

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Well if there was no planning permission & little chance of getting it before, then the rise in value is recent. Until a sale takes place any value is opinion & not fact. The probate value is a good starting point, if you claim the value was higher at death then IHT of 40% ma be payable. CGT is 18/28%
We're currently investigating the value at the time of inheritance, but like you say, it seems very subjective. Any Inheritance tax would have been paid already, not wishing to delve into my family background but it's been passed on twice, and the last case was over five years ago, AFAIK, any inheritance tax has been dealt with, I think at the time our share of the estate came under the threshold, so it's just capital gains.
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Old 14.12.2015, 17:14
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Re: Inheritance of land and Capital Gains

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We're currently investigating the value at the time of inheritance, but like you say, it seems very subjective. Any Inheritance tax would have been paid already, not wishing to delve into my family background but it's been passed on twice, and the last case was over five years ago, AFAIK, any inheritance tax has been dealt with, I think at the time our share of the estate came under the threshold, so it's just capital gains.
You can't claim it's value was 5 million on 5 April 2015 if it was 5k for IHT 5 years ago. The revenue would call that tax evasion & add penalties plus interest. They can investigate back 20 years so possibly the previous transfer as well. They have a pretty good idea how much land values change due to other sales in the area.
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Old 14.12.2015, 18:50
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Re: Inheritance of land and Capital Gains

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You can't claim it's value was 5 million on 5 April 2015 if it was 5k for IHT 5 years ago. The revenue would call that tax evasion & add penalties plus interest. They can investigate back 20 years so possibly the previous transfer as well. They have a pretty good idea how much land values change due to other sales in the area.
Sure you can. If the zoning of the land changes, its value changes. Cyrus' question is whether that change occurred with the first whiff of interest from the property developer, or only once the rezoning had gone through.

In many cantons in Switzerland, you'll find agricultural land going for a couple of hundred francs per square metre, alongside residential land priced at CHF 2,000 per square metre. Do you seriously believe it would constitute tax evasion if the agricultural land were declared at CHF 200 in one year, and CHF 2,000 the next (after being rezoned)?
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Old 14.12.2015, 19:47
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Re: Inheritance of land and Capital Gains

I'm not sure that rezoning is the right term, certainly we thought the land was practically valueless, it's only through the fact that we the inheritors could get ourselves together and offer the land as a package deal that it got considered as a new sports ground.

The developers are looking to build new houses, and that's where they're going to make their money, transferring the sports ground from it's old location to our land is a part of whatever deal they have going on, the old sports ground is in an area where residential housing can be built.

So at some point, the land gained value, but had I just held onto my share of the land, in the middle of a greater tract, that value would not have been realised. To me, the whole thing seems very subjective, had this deal not gone ahead, I'd still be claiming a couple of quid rental a year and little prospect of sale at any value, but because our family got together and agreed to act through a single agency, the value raised.

We do have a clause in the deal that if the land were to be rezoned to residential use in the near future, we would get a share of that increase too, that would be a whole other legal quagmire.

EDIT: Just to be clear, the land is in a green zone and there is restriction on it's use, a sports ground is within that restrition, but housing isn't.
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Old 14.12.2015, 20:00
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Re: Inheritance of land and Capital Gains

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Sure you can. If the zoning of the land changes, its value changes. Cyrus' question is whether that change occurred with the first whiff of interest from the property developer, or only once the rezoning had gone through.

In many cantons in Switzerland, you'll find agricultural land going for a couple of hundred francs per square metre, alongside residential land priced at CHF 2,000 per square metre. Do you seriously believe it would constitute tax evasion if the agricultural land were declared at CHF 200 in one year, and CHF 2,000 the next (after being rezoned)?
UK does not work in the same way as CH, funny that
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Old 14.12.2015, 20:13
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Re: Inheritance of land and Capital Gains

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UK does not work in the same way as CH, funny that
Believe me, rezoning land in the UK can increase its value manyfold. I find that very funny (or at least profitable).
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Old 14.12.2015, 21:37
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Re: Inheritance of land and Capital Gains

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Believe me, rezoning land in the UK can increase its value manyfold. I find that very funny (or at least profitable).
Assuming the op had a professional valuation at the time of probate then it will be easy to to show the revenue, if they just wrote down a low no then they will have some explaining to do.
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Old 14.12.2015, 22:48
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Re: Inheritance of land and Capital Gains

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Assuming the op had a professional valuation at the time of probate then it will be easy to to show the revenue, if they just wrote down a low no then they will have some explaining to do.
We did not, all parties assumed the land was nice to have but pretty much worthless, at no stage did anyone question that assumption, taxmen included.

It's pretty much since that the UK has started to realise they may have a problem with housing that anything happened, in the area it's situated, there's a shortage of land allowed for housing and there's a mandate to increase housing in the area.

The land used to be run as part of a market garden, but since fifty years or so, was not part of any kind of profitable business, it's situated in between some major roads that make it unsuitable to become a part of a larger farming complex, and as stated before, is not zoned for housing.

As far as anyone knew it was worthless and I was told, was only worth something in the thousands, if that. It simply wasn't worth paying a lawyer or surveyor to appraise it.

However, recent developments have made it worth a hell of a lot more, and I don't think it's a standard appreciation of value, the land would not have appreciated to the value it is now by just leaving it alone. By a combination of good luck and family ties, the land is worth substantially more than if I were an independent actor letting it be. That appreciation happened recently, I don't want to avoid tax, but I don't want to pay more than I have to....
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Old 15.12.2015, 00:25
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Re: Inheritance of land and Capital Gains

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Assuming the op had a professional valuation at the time of probate then it will be easy to to show the revenue, if they just wrote down a low no then they will have some explaining to do.
What revenue?
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Old 15.12.2015, 00:35
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Re: Inheritance of land and Capital Gains

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What revenue?
I get a yearly email form my uncle telling me I got a couple of quid rent, it's literally not worth transferring to my bank account, I couldn't even buy a pint with it... The rent was agreed many, many years ago and never raised, they just keep a lawnmower and other random stuff there.
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