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  #1  
Old 18.02.2007, 22:56
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Swiss tax deductions - UK mortgage interest?

Hi all,

I have a property in the UK and am paying interest on the mortgage in the UK.

Does anyone know if it is possible to claim deductions from swiss income tax for this UK mortgage interest?

Thanks
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  #2  
Old 18.02.2007, 23:24
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Re: Swiss tax deductions - UK mortgage interest?

Excellent question - hope someone knows the answer.
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  #3  
Old 18.02.2007, 23:51
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Re: Swiss tax deductions - UK mortgage interest?

I had this - sort of - in that I filled in a Swiss tax return and a UK tax form at the same time. Our property in the UK was rented out and the mortgage set against the rental income...
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Old 19.02.2007, 01:40
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Re: Swiss tax deductions - UK mortgage interest?

I'm not an expert and you should get expert advice. But, as far as I know, the answer is Yes; however, whether it's worthwhile depends...

1) If you are taxed "directly" in Switzerland (i.e. your employer witholds taxes from your salary), which you probably are, then you can -in theory- deduct the foreign mortgage interest, but you must write to your Canton of residence for approval. BUT, note that CH levies an asset tax on the value of ALL assets you hold (including those abroad), so you would have to declare the value of the property and pay CH tax on that value.

2) If you rent the property out while you are in CH, you must declare the rental income to the UK taxman (along with any other UK income) and pay tax on that. In which case, it may be more beneficial to claim the mortgage interest deduction in the UK. BTW, if you rent out the property in the UK you must register with the UK taxman, otherwise your rental agent is legally obliged to deduct tax from the rent before remitting it to you.

So, whether or not it's worthwhile claiming the deduction in CH depends on: the value of the property; the amount of interest; your tax brackets (in both the UK and CH). Get proper tax advice from a Swiss accountant (tax rules were invented to keep all accountants fully employed). And be thankful that you don't have to file a US tax return.
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Old 19.02.2007, 01:40
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Re: Swiss tax deductions - UK mortgage interest?

Quote:
Hi all,

I have a property in the UK and am paying interest on the mortgage in the UK.

Does anyone know if it is possible to claim deductions from swiss income tax for this UK mortgage interest?

Thanks
Yes it is possible to claim deductions on your UK mortgage interest. If the property is rented then you can show the rental income. If it is not rented out then an imaginary income will be added to your total declared amount. There is a special german term for that.
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Old 19.02.2007, 13:14
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Re: Swiss tax deductions - UK mortgage interest?

Another point is if you can claim mortage interest relief in Switzerland on a house in the UK, you will have to add the value of the UK house to your 'wealth' on the Swiss tax form. This is unlikely to be anywhere near as the interest deduction, but should be considered...
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Old 19.02.2007, 13:16
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Re: Swiss tax deductions - UK mortgage interest?

Hi all,

Thanks for the information. I will claim the mortgage interest deduction from my rental income in the UK when I submit my UK tax return.

Now this might be a silly question... but does this mean that I cannot claim a deduction from my Swiss tax for the same mortgage interest?

Thanks!
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Old 19.02.2007, 13:20
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Re: Swiss tax deductions - UK mortgage interest?

Quote:
<snip>
Now this might be a silly question... but does this mean that I cannot claim a deduction from my Swiss tax for the same mortgage interest?

Thanks!
IMO deduction the same thing twice would be pushing your luck...
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Old 20.02.2007, 09:39
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Re: Swiss tax deductions - UK mortgage interest?

Quote:
Hi all,

I have a property in the UK and am paying interest on the mortgage in the UK.

Does anyone know if it is possible to claim deductions from swiss income tax for this UK mortgage interest?

Thanks
Yes it is possible but read Adfabs post #5 first and you will answer the value of this yourself. In Switzerland you will have a net income status ie income minus mortgage interest payments. The net income will then be taxable. Furthermore the value of the house net ie the equity in the house is added to your global wealth and taxed...
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Old 25.03.2007, 12:33
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Re: Swiss tax deductions - UK mortgage interest?

Hi everyone,

1. Do we need to declare a UK property value on swiss tax return (e.g. for calculation of wealth tax)?

2. How about rental income? - Does this need to be declared if the rental income is already declared and taxed in the UK?

Thanks
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  #11  
Old 25.03.2007, 12:46
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Re: Swiss tax deductions - UK mortgage interest?

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Hi everyone,

1. Do we need to declare a UK property value on swiss tax return (e.g. for calculation of wealth tax)?

2. How about rental income? - Does this need to be declared if the rental income is already declared and taxed in the UK?

Thanks
You seem to be asking the same questions over again.

1) No. But if you ever want to bring the equity from the sale of the UK property to Switzerland, they may well ask where it came from and claim back weath tax.

2) No. You should not be taxed twice.
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  #12  
Old 25.03.2007, 13:54
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Re: Swiss tax deductions - UK mortgage interest?

There are some quite misleading posts so far on this.

In Switzerland it works like this (assuming you are direct taxed or paying quellensteuer but filling in a tax return):
- you declare the income from renting
- you declare the mortgage interest
- you declare the value of the property
- you declare the mortgage liability

These are all taken into account in determining your tax rates (income and assets), however you in Switzerland you are only taxed on land and buildings actually in located in Switzerland so they do an auscheid (or répartition in French), and you dont pay tax on the overseas income or assets or get the benefit of the deductions...

Assuming you are not resident or ordinarily resident in the UK, you have to declare your rental income, but can claim the interest as it is commercial property income (along with other deductions for costs and wear and tear if let furnished). So IF you have a tax allowance in the UK (c.5kgbp each) and no other UK income (you dont declare your income on invesments and wont have a salary), it basically means if you own the property jointly you can get 10kgbp income TAX FREE.

Now how rare is that??

Daniel

Last edited by dannyt986; 25.03.2007 at 14:06. Reason: Refinement.
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  #13  
Old 25.03.2007, 13:55
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Re: Swiss tax deductions - UK mortgage interest?

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You seem to be asking the same questions over again.

1) No. But if you ever want to bring the equity from the sale of the UK property to Switzerland, they may well ask where it came from and claim back weath tax.

2) No. You should not be taxed twice.
Not declaring your property is tax evasion. Now that's not a crime in CH, but it can be expensive.

See my other post re point 2.

Daniel
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Old 26.03.2007, 13:21
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Re: Swiss tax deductions - UK mortgage interest?

Thanks MUCH clearer now!! Sorry it's our first time filing tax in Switzerland
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Old 15.04.2007, 19:29
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Re: Swiss tax deductions - UK mortgage interest?

just wanted to give my experience in this regard:

I have let out my flat in UK since the day I came to CH in 1999
I have delcared the asset in CH with the income less deductions in UK and in CH with my CH income.
In UK I paid no tax as net UK income was less than yearly personal allowance
In CH I paid less tax than otherwise as the yearly accounting loss was offsettable against CH tax liability.

In March 2007 I got a letter from UK-HMRC that I no longer need to submit returns after the the one for Apr5th 2007-yippee!

In CH the value is assessed each five yrs so I benefited from only "delayed" additional wealth tax liability despite regular increases in valuation.

Now this CH declaration history is useful for financing my impending purchase in CH.

The admin impact was having to make two simple spreadsheets showing per month incomings and outgoings and my yearly mortgage interest payment, with the deductions from my UK return for wear & tear, repairs etc, about 1 hrs work for each country. The CH return allows you the choice of a 20% offset or real amounts. My UK property is managed and they send me monthly PDFs which I tot up in my spreadsheet.

Luckily I have a steady tenant and would just love to re-mortgage for lower interest rates somewhere like in liechtenstein

Hope this experience summary helps. If anyone wants my spreadsheet templates, let me know.
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Old 16.04.2007, 09:45
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Re: Swiss tax deductions - UK mortgage interest?

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In March 2007 I got a letter from UK-HMRC that I no longer need to submit returns after the the one for Apr5th 2007-yippee!

Luckily I have a steady tenant and would just love to re-mortgage for lower interest rates somewhere like in liechtenstein
Thats funny because after 7 years of not doing a return, I just go a letter saying I had to, because basically it was a new requirement for non resident landlords... I will look it up in more detail again.

You can remortgage your UK property in CHF or EUR out of the UK with quite a few banks. As long as you are comfortable with the FX risk on the debt vs the property and the fact that most of these mortgages are variable rate its fine. I use Fortis bank and pay 1% over libor/euribor and the loan is freely convertible into other major (chf, gbp, usd, yen, eur) currencies once a quarter if you so fancy.

Daniel
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Old 16.04.2007, 12:41
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Re: Swiss tax deductions - UK mortgage interest?

Cool thanks for the update. Will take a look.
By the way I forgot to mention earlier, it is possible to register for payment with the Revenue of all monies gross to be paid to you even if your property is managed.
see http://www.hmrc.gov.uk/cnr/nrl6.pdf

Hope this helps
Mick
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Old 18.08.2007, 19:14
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Re: Swiss tax deductions - UK mortgage interest?

In relation to the value of the propoery in the UK, how is that calculated for the purpose of asessing the amount of wealth tax?


Lets say you bought it 3 years ago for 500k, how would they calculate the value of that asset today?

Also if you are getting a very low rent (which i am as my mum lives there) AND thus recording a big accounting loss, is this directly offsetable against your swiss income ....or is there some kind of determination as to what the market rent would be?

Thanks alot if anyone knows the answer.
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Old 18.08.2007, 23:45
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Re: Swiss tax deductions - UK mortgage interest?

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In relation to the value of the propoery in the UK, how is that calculated for the purpose of asessing the amount of wealth tax?


Lets say you bought it 3 years ago for 500k, how would they calculate the value of that asset today?

Also if you are getting a very low rent (which i am as my mum lives there) AND thus recording a big accounting loss, is this directly offsetable against your swiss income ....or is there some kind of determination as to what the market rent would be?

Thanks alot if anyone knows the answer.
Essentially the Swiss authorities have no idea what you property is worth - only from what you tell them. If you ever want to bring the capital over here, they may wonder where it came from. If not I suggest you value it at whatever you want, if you declare it at all...
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Old 19.08.2007, 11:20
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Re: Swiss tax deductions - UK mortgage interest?

Agree with Abfab, I update the value only every 5 yrs as that's all that's required under CH law. It means of course in the meantime that if I sell I may have to explain a little but the telegraph has been running stories in its property section last month on how 4 bed houses in SW London are going for above asking price due to shortages.
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