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Old 20.08.2007, 02:14
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Taxation on property abroad

I am thinking of buying a vacation property in eastern Europe.

1) Does canton zug make you pay tax on property in another country (other than adding it to your wealth tax) ?

2) Will potential rental income be added to my income, even if I do not rent the 2nd house?

3) for wealth tax, will the value be what I paid for the property or will I have to get it appraised each year - or will the tax department determine increasing value?

4)can I deduct from swiss taxes what I pay for property taxes or mortgage in the local country?

many thanks in advance
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Old 20.08.2007, 07:14
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Re: Taxation on property abroad

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I am thinking of buying a vacation property in eastern Europe.

1) Does canton zug make you pay tax on property in another country (other than adding it to your wealth tax) ?
Unless you are printing the money to buy the property or using previously undeclared funds, you will not be increasing your wealth. A mortgage is not an asset.

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2) Will potential rental income be added to my income, even if I do not rent the 2nd house?
If you mean Eigenmietwert, only if you declare it and only if you do not pay tax on the income in eastern Europe.

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3) for wealth tax, will the value be what I paid for the property or will I have to get it appraised each year - or will the tax department determine increasing value?
Generally Swiss tax authorities expect a revaluation every 5 years. The value will be what you tell them it is. If you tell them at all

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4)can I deduct from swiss taxes what I pay for property taxes or mortgage in the local country?
It's a mute point. You can try. It really depends if you expect to bring the capital into Switzerland at some point in the future. If so, then it's a good idea to show where the money is now and avoid any surprises down the line. What you can't do is claim the mortgage interest twice - here and there...
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Old 02.12.2007, 21:40
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Re: Taxation on property abroad

Hi,
Interesting conversation – but I don’t fully understand the answers…

I have a similar question:
We live in Zurich since 2 years (B-permit) and have now bought a vacation house back the in UK. We don't rent it out or anything – we just use it on our own when we are "home" on vacations a few weeks per year. We have mortgage on the house (about 60% of the "value") and the mortgage are taken in a bank in UK. We don't deduct the interest rates we pay in UK because we don't have an income in UK. (only income here in Switzerland and pay tax here on everything…)

Question: Do we have to pay tax on the house here in Switzerland/Zurich? Eigenmietwert? If that's the case – how is the tax setup?

Thanks a lot,
Swisson
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Old 02.12.2007, 21:59
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Re: Taxation on property abroad

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Hi,
Interesting conversation – but I don’t fully understand the answers…

I have a similar question:
We live in Zurich since 2 years (B-permit) and have now bought a vacation house back the in UK. We don't rent it out or anything – we just use it on our own when we are "home" on vacations a few weeks per year. We have mortgage on the house (about 60% of the "value") and the mortgage are taken in a bank in UK. We don't deduct the interest rates we pay in UK because we don't have an income in UK. (only income here in Switzerland and pay tax here on everything…)

Question: Do we have to pay tax on the house here in Switzerland/Zurich? Eigenmietwert? If that's the case – how is the tax setup?

Thanks a lot,
Swisson
The house is part of your total wealth which is taxed and the mortgage is a debt which you can offset against tax.
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Old 02.12.2007, 22:25
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Re: Taxation on property abroad

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Hi,
Interesting conversation – but I don’t fully understand the answers…

I have a similar question:
We live in Zurich since 2 years (B-permit) and have now bought a vacation house back the in UK. We don't rent it out or anything – we just use it on our own when we are "home" on vacations a few weeks per year. We have mortgage on the house (about 60% of the "value") and the mortgage are taken in a bank in UK. We don't deduct the interest rates we pay in UK because we don't have an income in UK. (only income here in Switzerland and pay tax here on everything…)

Question: Do we have to pay tax on the house here in Switzerland/Zurich? Eigenmietwert? If that's the case – how is the tax setup?

Thanks a lot,
Swisson
The answer(s) will depend on where the 40% came from and whether that was ever declared in Switzerland and what your long-term intentions are.

For example if you sell the UK property and bring the money to Switzerland, you will/should declare the amount and the Swiss tax authorities will expect you to furnish them with details of where the money came from and why you hadn't previous declared it.

But if you intend returning to/settling in the UK and the money from the property will never reach here, there seems little point in 'complicating your tax situation' by mentioning it.

If you do declare it and have the Eigenmeitwert (which is normally calculated by the local authority here and will be an arbitrary figure that you could supply) added to your Swiss income, then you could also claim the UK mortgage interest and set it off against income. (As Swissbob says above.)

We do not know your nationality, circumstances, permit type, how you are taxed here (source or by tax declaration) so frankly, you would be advised to get expert advice on this if you are worried. But don't expect a straightforward answer...
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Old 02.12.2007, 22:29
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Re: Taxation on property abroad

Thanks a lot for the answer but can you please be more precise…
Is the house we bought outside Switzerland part of the so called "Eigenmietwert"… I'm actually not aware of what "Eigenmietwert" really means more then that I have heard stories from friends that "If you buy a house – the value (3% of something…) is put in top of your normally salary and you pay a certain part in tax?

Let's say that the new bought house outseide Switzerland (in teh UK) is worth around CHF 500 000 and we have loans on it for CHF 300 000 and paying yearly interest of CHF 15000

=> What is the effect? Is it only a net wealth of CHF 200000=500000-300000 which I have to pay a small promille tax on - and that I can deduct the CHF 15000 in my yearly tax declaration here in Switzerland if I want - OR… is it something else (scary..)

Thanks,
Swisson
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Old 02.12.2007, 22:37
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Re: Taxation on property abroad

Thanks Ab Fab and SwissBob for the answers:
The situation is the following:
1. The 40% I have put in myself has already been declared here in Switzerland already – so the tax authorities knew them already.
2. The intention for us is to stay here in Switzerland long term – and we have B-permits.

Ad Fab: Your reply: " If you do declare it and have the Eigenmeitwert…) " Can you please give men a concrete example how it works. In my example above – how much is pu ton top? And do I really pay tax on it?

Thanks again,
Swisson
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Old 03.12.2007, 07:24
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Re: Taxation on property abroad

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Thanks Ab Fab and SwissBob for the answers:
The situation is the following:
1. The 40% I have put in myself has already been declared here in Switzerland already – so the tax authorities knew them already.
2. The intention for us is to stay here in Switzerland long term – and we have B-permits.

Ad Fab: Your reply: " If you do declare it and have the Eigenmeitwert…) " Can you please give men a concrete example how it works. In my example above – how much is pu ton top? And do I really pay tax on it?

Thanks again,
Swisson
Because of 1 ) & 2), I would say you had better declare everything. Otherwise you may be asked where the 40% went.

Your local town hall tax office will have tables to Eigenmeitwert. This is based on the square meters of the land for houses. For Canton Zurich full details are here:
http://www.steueramt.zh.ch/html/erla...wertung_03.htm


27 Für Einfamilienhäuser:

bis Basiswert Fr. 30’000
effektive Grundstücksfläche, höchstens jedoch 400m²

Basiswert zwischen Fr. 30'000 und Fr. 90’000
effektive Grundstücksfläche, höchstens jedoch 400m² + (Basiswert - 30'000)/200

Basiswert über Fr. 90’000
effektive Grundstücksfläche, höchstens jedoch 700 m² zuzüglich, 100 m² pro volle Fr. 30'000 Basiswert (oder Bewertung entsprechend den konkreten Verhältnissen).

These amounts are added to your annual income on page 2 of the tax return.

I would ask you local tax office about all of this. Also there is the question of tax on profit on the sale of the property (Grundstuckgeweinsteuer). I feel this does not apply to property outside Switzerland (as itwas introduced to stop property spoeculation here), but it is better to know the full picture from the outset.
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Old 03.12.2007, 07:36
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Re: Taxation on property abroad

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Thanks a lot for the answer but can you please be more precise…
Is the house we bought outside Switzerland part of the so called "Eigenmietwert"… I'm actually not aware of what "Eigenmietwert" really means more then that I have heard stories from friends that "If you buy a house – the value (3% of something…) is put in top of your normally salary and you pay a certain part in tax?

Let's say that the new bought house outseide Switzerland (in teh UK) is worth around CHF 500 000 and we have loans on it for CHF 300 000 and paying yearly interest of CHF 15000


=> What is the effect? Is it only a net wealth of CHF 200000=500000-300000 which I have to pay a small promille tax on - and that I can deduct the CHF 15000 in my yearly tax declaration here in Switzerland if I want - OR… is it something else (scary..)

Thanks,
Swisson
We are partly duplicating posts here, but:

Eigenmietwert is based on square meters of land. For properties in Switzerland, the local authority inspector will pay a visit and check the dimensions. Eigenmietwert is the nominal bonus you get from not having to rent. I have no idea what happens abroad. Eigenmietwert may not even apply. Check with your local tax office and let us know. Long term this addition to your income is being phased out along with tax relief on mortgages.

Wealth tax (Vermögensteuer) is a different matter. This is page 4 of the Swiss tax form and you add a 'modest' value (as opposed to market value) of your property, again valued by the local authority, less the mortgage debt, to your assets along with car, bank deposits, insurance policies, cash in hand etc. The level of wealth tax is low. It varies from community to community...
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Old 03.12.2007, 13:32
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Re: Taxation on property abroad

This sounds similar to my situation. My wife and I are moving to Zurich for at least 1-2yrs, although not currently intending this to be permanent. We have a house in the UK, which is 95% mortgaged (i.e. little capital). I was advised by a recruitment agent to mention this to my new employers - although I didn't see the point, it is outside Switzerland, we won't be renting the house (and if we did would get taxed in UK anyway) and technically "own" (capital) very little of it.

So do I bother mentioning it or not? I don't intend on bringing the capital into Switzerland - but I'm wondering whether if I subsequently do so (i.e. in 2 years) will I get nailed for not mentioning it? Can anyone advise:

1. What is the rate of wealth tax on capital in homes - we will be living in Zurich, and can I claim my mortgage repayments as a tax allowance to offset the wealth tax?
2. What would the potential liability be if I didn't declare anything, and then suddenly turned up with £5k-£10k into a Swiss bank account? Would it be a higher tax rate than standard wealth tax? And would it be a one-off charge to bring the capital into Switzerland?
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Old 03.12.2007, 16:26
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Re: Taxation on property abroad

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This sounds similar to my situation. My wife and I are moving to Zurich for at least 1-2yrs, although not currently intending this to be permanent. We have a house in the UK, which is 95% mortgaged (i.e. little capital). I was advised by a recruitment agent to mention this to my new employers - although I didn't see the point, it is outside Switzerland, we won't be renting the house (and if we did would get taxed in UK anyway) and technically "own" (capital) very little of it.

So do I bother mentioning it or not? I don't intend on bringing the capital into Switzerland - but I'm wondering whether if I subsequently do so (i.e. in 2 years) will I get nailed for not mentioning it? Can anyone advise:

1. What is the rate of wealth tax on capital in homes - we will be living in Zurich, and can I claim my mortgage repayments as a tax allowance to offset the wealth tax?
2. What would the potential liability be if I didn't declare anything, and then suddenly turned up with £5k-£10k into a Swiss bank account? Would it be a higher tax rate than standard wealth tax? And would it be a one-off charge to bring the capital into Switzerland?
If in doubt consult a tax expert or ask your local tax office. You are not recommended to make tax decisions based on anonymous posts on a forum.

What this has to do with your employer, I don't know. Unless you pay tax at source and the agency thinks your employer may reduce the deductions - but I doubt it.

1) If you are taxed at source I don't think wealth tax comes into play. But it is raised on all your 'wealth', not just property, but car, cash at bank, in your pocket etc. on December 31st. But it is low. It varies from Canton to Canton. From my 2006 Zurich tax 'explanation' if your wealth is under CHF640,000 you pay 1 per mille (not per cent) ie. CHF1 for every CHF1000. 640K to 1.207million you pay 1.5 per mille.

A mortgage is not an asset, so property is valued 'modestly' - not market value and mortgages are deducted before adding to your wealth.

2) 5 - 10K would hardly be noticed. CHF250,000 would raise eyebrows. Your liability would be all the years you didn't pay it. Plus possibly a fine.
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