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Old 02.11.2019, 20:09
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Tax on foreign rental property on software, how exactly?

Hi,

I´ve been using the Tax Software to file my tax return in Zurich and I cannot understand what is happening with this particular issue. Let´s see if somebody has gone through this and can figure out what I´m doing wrong.

I believe the general idea is that rental income abroad should not increase the taxable income, but should increase the tax bracket that is applied. You see this as the difference between ¨Steuerbar CHF" and "Satzbestimmend CHF" on the final calculation, the Steuerberechnung.

My steps:
  1. On the software, in Vermögen > Liegenschaft Verzeichnis I add the information about my apartment in Spain and on ¨Ertrage und Kosten der Liegenschaft > Mieteinnahmen/Mietwert" I add the rental income, let´s say it´s 10000 CHF and let´s also say I have a 100k income after all deductions are applied (i.e. all Abzüge).

    Rental income seems to have a 20% deduction and what actually appears on the program is 8000. The remainder 2000 appear as ¨Cost¨for some reason.

  2. When I print the results it´s when it gets interesting. What I thought I would see is:
    • On ¨Steuerbares Einkommen Gesamt¨ in 25, I thought I should see 108000 and I do, in fact, see this amount.
    • On 26.2 ¨Von Steuerebaren Einkommen > Auf steuerbare Einkünfte in Ausland¨, I thought I´d see 8000. This is the amount of income that is taxable somewhere else (in Spain) but I see a much smaller quantity, around 1000.
    • This has the effect of not having my final taxable income at 100k, but at 107k.
    • However, the principle described before does apply and I get a Satzbestimmend amount of 108k, and its corresponding tax rate is applied to an income of 107k.

I feel I´m doing something wrong somewhere but I have no idea where!

Any clues?

Last edited by randomSpaniard; 02.11.2019 at 21:37.
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Old 02.11.2019, 20:45
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Re: Tax on foreign rental property on software, how exactly?

First, the 20% deduction on rental income is for lump-sum depreciation.

Assuming you are using the Zurich Private Tax software, be sure to run the SA (Interkantonale/ Internationale Steuerausscheidung) schedule. On the third and fourth pages of this schedule you will see the income split for canton, Bund and international.

Hope this assists you.
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Old 02.11.2019, 21:28
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Re: Tax on foreign rental property on software, how exactly?

Hi,

Thanks for your answer, but I´m still confused.

First of all, is the premise correct? Is it really true that when I have a rental income, I should only see a tax bracket increase, but the Steuerbar Einkommen should be the same? Because if this is not true, well, the rest doesn´t follow.

If this is really the way it is. Then when I run the Steuerauscheidung with 10k rental income, I get:

1. An added income into the Steuerbar Einkommen of 8000, going straight to my base (Total der Einkunfte)
2. A mere 1098 CHF deducted from the base under "Auf steuerbare Einkunfte im Ausland¨ further down, so that my total Steuerbar Einkommen increases by almost 7k. Shouldn´t this be 8k instead of 1k under the premise above?

I don´t think there is any more detail on this, nor do I see how the 1098 CHF figure is produced at all. But it does have a significant impact on the final tax.

EDIT: By the way, there´s a big disclaimer that this calculation done by the program could be wrong due to the complexities that go into it. Maybe this is what´s happening?
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Old 03.11.2019, 22:34
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Re: Tax on foreign rental property on software, how exactly?

To the best of my knowledge, the principle of foreign rental income pushing up your final tax % but not the taxable base is correct.

For the Canton Zug tax calculator I also could not find this important differentiation.

Did you try to contact the tax authorities directly about this?
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Old 03.11.2019, 22:52
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Re: Tax on foreign rental property on software, how exactly?

I asked same question to Zurich tax office, they replied "Please include the fair market value or your property on page 4 of the main form (line 31.1). If you have a mortgage associated with the property, please include it on line 34, interest expenses on line 12, page 3, and the rental income on line 6, page 1 of the main form. Real estate maintanance costs are either a lump-sum of 20% or you can claim your actual expences. All of this shall only be considered for tax rate purposes (and is not actually taxed in Switzerland)."

So fair market value for the wealth tax purpose and rental income to determine the tax rate. I hope this helps.

Quote:
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Hi,

I´ve been using the Tax Software to file my tax return in Zurich and I cannot understand what is happening with this particular issue. Let´s see if somebody has gone through this and can figure out what I´m doing wrong.

I believe the general idea is that rental income abroad should not increase the taxable income, but should increase the tax bracket that is applied. You see this as the difference between ¨Steuerbar CHF" and "Satzbestimmend CHF" on the final calculation, the Steuerberechnung.

My steps:
  1. On the software, in Vermögen > Liegenschaft Verzeichnis I add the information about my apartment in Spain and on ¨Ertrage und Kosten der Liegenschaft > Mieteinnahmen/Mietwert" I add the rental income, let´s say it´s 10000 CHF and let´s also say I have a 100k income after all deductions are applied (i.e. all Abzüge).

    Rental income seems to have a 20% deduction and what actually appears on the program is 8000. The remainder 2000 appear as ¨Cost¨for some reason.

  2. When I print the results it´s when it gets interesting. What I thought I would see is:
    • On ¨Steuerbares Einkommen Gesamt¨ in 25, I thought I should see 108000 and I do, in fact, see this amount.
    • On 26.2 ¨Von Steuerebaren Einkommen > Auf steuerbare Einkünfte in Ausland¨, I thought I´d see 8000. This is the amount of income that is taxable somewhere else (in Spain) but I see a much smaller quantity, around 1000.
    • This has the effect of not having my final taxable income at 100k, but at 107k.
    • However, the principle described before does apply and I get a Satzbestimmend amount of 108k, and its corresponding tax rate is applied to an income of 107k.

I feel I´m doing something wrong somewhere but I have no idea where!

Any clues?
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Old 04.11.2019, 09:47
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Re: Tax on foreign rental property on software, how exactly?

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I asked same question to Zurich tax office, they replied "Please include the fair market value or your property on page 4 of the main form (line 31.1). If you have a mortgage associated with the property, please include it on line 34, interest expenses on line 12, page 3, and the rental income on line 6, page 1 of the main form. Real estate maintanance costs are either a lump-sum of 20% or you can claim your actual expences. All of this shall only be considered for tax rate purposes (and is not actually taxed in Switzerland)."

So fair market value for the wealth tax purpose and rental income to determine the tax rate. I hope this helps.
And of course any money in foreign bank accounts or shares etc have to be declared
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