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Old 26.08.2007, 20:01
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What are "Withholding Tax" and "Wealth Tax"?

Having just completed my first ever Tax Return - well, I paid eine Treuhand to do it for me - I thought I'd try to understand what Federal Withholding Tax and Wealth Tax are.

My logic circuits tend to shut down whenever I try to understand anything to do with tax because I know it's not a system that's supposed to make sense. More than often the choice of terms is misleading. z. B. "Value Added Tax". How, precisely, does taxing certain goods "add value"? Pure Orwellian doublethink.

1. Federal Withholding Tax. It appears to be nothing more than a 35% tax on interest earned or lottery winnings. Is this so? Why is it called "Withholding Tax"? Who is withholding what from whom?

2. Wealth Tax. "Living and Working in Switzerland" says it's a cantonal tax levied on total wealth and is between 0.25% and 1%, depending on the canton. Clear enough.

But how are they applied?

Suppose I was paid CHF 250K last year, and I have a house worth CHF 1.1M and a bank balance of CHF 100K as at 31.12.2006[1], where it has been earning interest at the rubbish Swiss rates. No other income at all.

I would be hit for income tax on the 250K. Clear enough.

Now I would already have paid 35% withholding tax on the interest on my balance. I assume I would pay wealth tax on some part of the value of my house. Would I have to pay wealth tax on all or part of my cash, despite having already been stiffed for 35% of <1% interest?

[1] If I really was that well off I would probably have a better idea of the tax rules.
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