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Old 18.03.2010, 01:18
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Help needed with Net Wealth Tax

Hi All,

I've tried searching on this forum for the below question but can't seem to find any so apologies if this has been covered off before..

My husband and I are moving over to Swiss in June and I will be the only one working in Switzerland. We intend to keep our home in England so we can make frequent weekend trips back to UK - every 6 - 8 weeks or so. We also run a business in UK hence the frequent weekend only trips back to UK. Based on the amount of time in CH from June, we will both be resident in CH.

We own our house outright and my husband also holds a Swiss passport. I have read that if resident in CH, you will be taxed on your net wealth - so property abroad will be assessed for its rental value and you pay tax based on that assessment. This is very worrying as we have no plans to rent out our home so will be paying taxes on an income not actually received. Furthermore, the lack of a mortgage on the property means if indeed the case, we will have very little expenses with which to reduce the potential tax liability,

Please could someone explain how the net wealth tax works or point me in the direction of a document in English that sheds more light on this.

Thanks in advance
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Old 18.03.2010, 01:22
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Re: Help needed with Net Wealth Tax

Don't sweat. Foreign property is specifically excluded from the list of taxable assets, although you still need to declare it because your TOTAL asset base is used to calculate your tax rate on those of your assets that are taxable.

Hope that's clear. In a nutshell, if you have significant foreign property assets, you will not pay wealth tax on those assets, but you will pay (slightly) higher tax on your other assets that are taxable.
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Old 18.03.2010, 01:29
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Re: Help needed with Net Wealth Tax

Hi,

Thanks very much for the quick reply...phew!!! what a relief

ta!
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Old 18.03.2010, 06:59
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Re: Help needed with Net Wealth Tax

There are a few point that you need to consider with regard to the House I believe.

In Switzerland there is Wealth Tax/Capital Tax which is basically tax at (depending on canton) of about 0.2% on your net capital.
So say you have a £1,000,000 house with a £200,000 mortgage; you would pay tax at 0.15% on £800,000 => £1,200 per annum.

I gather that you are not bothering to rent your UK House out? Otherwise you will have to pay tax on the rental income of the house. Also technically (but not seen many people do this the correct way) a tenent should be deducting tax at 20% from the rent they pay on your house and paying it directly to the Inland Revenue in the UK.

You also have to consider the Capital Gains if you were to sell the UK house once your are resident in Switzerland; possibly in Switzerland or the UK.

A Swiss tax consultant regarding Wealth Tax/Income told me to decide at the time of becoming resident in Switzerland that I should concider what capital to declare in Switzerland on the basis of what capital I might need in the future in Switzerland and the tax to pay on the income of those assets (if they are generating income).

With property in the UK, a business in the UK (Sole trader or Limited Company), you working and resident in Switzerland, there are lots of tax considerations regarding residency of yourselves and the business; you might be advised to seek a Tax Consultant in Switzerland.

I have had the extremes on occassions with clients in the UK, where a married couple have seperated on paper for the purposes of the Inland Revenue to avoid Capital Gains on the sale of a second house only to have a re-union sometime after the sale of the property has been completed.
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Old 18.03.2010, 09:22
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Re: Help needed with Net Wealth Tax

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There are a few point that you need to consider with regard to the House I believe.

In Switzerland there is Wealth Tax/Capital Tax which is basically tax at (depending on canton) of about 0.2% on your net capital.
So say you have a £1,000,000 house with a £200,000 mortgage; you would pay tax at 0.15% on £800,000 => £1,200 per annum.
It is correctly pointed out in another answer that foreign real property does not get taxed, it only affects the rate of tax on otherwise taxable assets

Quote:
I gather that you are not bothering to rent your UK House out? Otherwise you will have to pay tax on the rental income of the house. Also technically (but not seen many people do this the correct way) a tenent should be deducting tax at 20% from the rent they pay on your house and paying it directly to the Inland Revenue in the UK.
The tenant or agent deducts basic rate of tax on rents paid to a nonresident landlord: http://www.hmrc.gov.uk/CNR/nr_landlords.htm HOWEVER, you can appoint someone as your "tax agent", indeed you can form a limited company to do that, with two results: those who have mortgages and expenses exceeding the rent don't have to pay tax or have tax deducted, and you can make a reasonable part of the rent (10-15%) a management fee, pensionable when paid to you.

Quote:
You also have to consider the Capital Gains if you were to sell the UK house once your are resident in Switzerland; possibly in Switzerland or the UK.
You get to choose your "main residence" which need not be the one you actually live in (but declare it to HMRC). There is no CGT on sale of UK assets by nonresidents, HOWEVER, if you were resident 4 out of the past 7 years, and if you sell while abroad and return to live in the UK within 5 years, you are subject to CGT then IF the property is in fact subject to CGT. Rental property is so subject, and the years used as main residence and as rental property are apportioned. But years rented while you are employed abroad, and the last 3 years you own the property, are not considered for that purpose.

Quote:
A Swiss tax consultant regarding Wealth Tax/Income told me to decide at the time of becoming resident in Switzerland that I should concider what capital to declare in Switzerland on the basis of what capital I might need in the future in Switzerland and the tax to pay on the income of those assets (if they are generating income).

With property in the UK, a business in the UK (Sole trader or Limited Company), you working and resident in Switzerland, there are lots of tax considerations regarding residency of yourselves and the business; you might be advised to seek a Tax Consultant in Switzerland.

I have had the extremes on occassions with clients in the UK, where a married couple have seperated on paper for the purposes of the Inland Revenue to avoid Capital Gains on the sale of a second house only to have a re-union sometime after the sale of the property has been completed.
I hope your spelling is better when you are writing to "clients". And tax fraud is a crime everywhere. Those who think that Switzerland is a safe bolt hole should consider the case of Ian Leaf: http://tinyurl.com/yzzq97s
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Old 18.03.2010, 09:46
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Re: Help needed with Net Wealth Tax

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I hope your spelling is better when you are writing to "clients".
Nope; my spelling is atrocious as is my grammer. I have never worked out the reason and have no excuse. Despite a UK private education; I put it down to lack of reading or just retarded.
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Old 18.03.2010, 10:14
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Re: Help needed with Net Wealth Tax

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A Swiss tax consultant regarding Wealth Tax/Income told me to decide at the time of becoming resident in Switzerland that I should concider what capital to declare in Switzerland on the basis of what capital I might need in the future in Switzerland and the tax to pay on the income of those assets (if they are generating income).
Isn't this fraud? You are resident in Switzerland so you need to declare all your taxable assets [I concur] I have also heard UK property is exempt which is just as well since the prices of real estate in the UK are crazy for you get...
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Old 18.03.2010, 12:35
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Re: Help needed with Net Wealth Tax

Many thanks to all who have contributed to this thread. all very useful information. We plan to declare all our assets once over in CH but I was just worried about the fact that there may be additional tax to pay on the value of our home in the UK. CGT will not be an issue as we don't have any intention of selling our home in UK in the foreseeable future. It is a really special property that we would like to hold on to pass on to our kids in the future.

But I agree that our tax situation may be bordering on complex and will be needing a CH tax expert..what with my employment in CH, our sideline business in UK which is run as a Ltd Co with both myself and hubby as directors, our home which we plan to mothball to facilitate frequent trips back home and a rental property which the rental income just about covers the mortgage + management expenses...oh dear!

Mary-Anne
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Old 18.03.2010, 20:09
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Re: Help needed with Net Wealth Tax

Crédit Suisse's Web banking facility has tax calculators that can help you predict tax liability anywhere in Switzerland. Perhaps other banks offer that online service as well.
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