I went through many threads before asking my question, and they explain things pretty well conceptually, but not to the level of detail I need. However, I believe many of you who lived in the country for a while would know the answer right away.
I am working on my Swiss tax return. This year my income consists of 3 components:
1) Salary
2) Capital gain
3) Dividends/Interest.
Each of them is taxed at a different rate:
- salary at its appropriate progressive rate,
- capital gain presumably is not taxed at all (since I am not a professional investor)
- dividends/interest at 35%
I was expecting to find a box to declare each amount separately. But what I find on my tax return form is the following:
- on the "assets" form, there is a box to declare the market value of each asset, and how much income that asset generated last year. Okay. However, there is no way to break the amount into 'capital gain' and 'dividends' parts. In addition, the total asset-related earnings amount (in my case capital gain + dividends) must be transferred to the main form and lumped together with the salary (!).
I am just afraid that if I submit my return like this, the tax inspector will simply apply progressive income tax rate to the whole amount and happily put my paper to the side, and I will be left making hopeless attempts to explain that this is not the way it was supposed to be.
If there is someone here who personally went through this experience of filling in the tax declaration including capital gain and dividends, please help.
There is no tax on capital gain. So there's no entry for it on the tax form. You declare your salary on the salary page. You declare you shares on the assets page - the same one as your bank account. You are taxed (wealth tax) on the total value of the shares.
All values are transferred automatically if you're using the software.
To be specific - now I've got EasyTax open! - Salary goes into Einkommen, Lohn. You put shares in Vermögen, Wertschrifften- und Guthabenverzeichnis.
When you add a share holding position here, you supply ISIN or Valoren number. If you're lucky, the fields will be filled for you. If you buy or sell in the year, these transactions are recorded. Share dividend income is also entered here.
Tip: in BL the dividend amount provided often is lower than the actual amount your received. This is due to the way BL treat dividend income.
The 35% tax is a withholding tax. It is credited to your tax account. But the tax calculation treats dividends as any other income. It's not taxed at a special rate.
If your capital gain is running into several 100,000s your tax office may ask if you inherited. Again, not usually taxable, but inheritance should be stated at the end of page 4 of the tax form (ZH)...
A question to the OP (out of curiosity): how do you arrive at your "capital gain"? Do you simply compare asset value T0 against T1?
In any event: In the salary "box" you fill in the net salary; in the assets "form" you fill in the market value and any actual income generated, i.e. dividends or interest. You would get this information from either (i) bank tax statement, or (ii) the dividend payment slips.
In most cases, the dividends and interest will have been subject to a withholding tax of 35%, in which case you enter the (full) income amount into the field which has withholding tax, and in some cases (e.g. account interest of less than CHF 200) no withholding tax is applied, and you enter income amount into the field which has no withholding tax.
Filling out the assets form gets real interesting if you want to claim back foreign withholding taxes, in which case you get to form DA-1 (and need to submit the corresponding slips). I am still trying to figure out how to get the foreign withholding taxes back for some of my iShares etfs...
A reduced dividend taxation is generally only available if you hold 10%+ of a company (to lessen the blow of double taxation, i.e. once on the company profits, and once on the dividends).
This is my first year getting to deal with US withholding taxes. The BS tax software did not show me form DA-1 or any US-tax withholding value, so I submitted as is; they might take it into account when they assess my tax, and if not, I'll query it. It's not much, but I would like that tax credit.
If you do a Swiss tax return you will end up with two main numbers: Taxable income and taxable wealth. The taxable income includes any kind of income including income from employment, income from self employment, rental income, imputed rental income, dividends, interests, license fees, capital gains (if taxable), winnings from bettings, etc. (but not gifts, inheritances, and interest from preferred pension and saving plans such as pillar 2 and pillar 3a).
The 35% for dividends/interest is just withholding tax, which will go toward the actual tax owned.
If you have accumulating funds only the dividend/interest part is taxable, and has to be entered in the respective column. You will need a end of year statement, where the dividend/interest part is separated from the capital gain.
For stocks, bonds, and currencies (includes cryptos) it is pretty easy, list end of year value, plus if applicable the paid out dividends/interests,
Sorry, it's not quite like that. If there is a gap in your assets in comparison to last year, and this gap cannot be explained by your salary, you'll get a letter from the Tax office asking you to explain the gap. Been there, done that. Then you reply by stating the capital gain and attaching all necessary papers. So the question is: how to avoid this, and get it right first time?
This is exactly what happened last year. And I had to reply that I didn't inherit, and supplied proof, and they left me alone. But how to do it right from the first attempt? This is the essence of my question. There must be a way, right?
If you are going to keep making massive capital gains, then you could add a note at the bottom of page four.
The tax office could have worked mine out by looking at what investments were no longer on my tax declaration and what the market price was during the year. But it’s easier for them to ask!
I guess we both understand the theory involved pretty well, and I know precisely how much dividends and capital gain I've got. But, as I already replied to another poster, my question is specifically about the Swiss tax declaration form, which does not provide a clear way to declare the capital gain. Not for it to be taxed, but to explain the increase in one's wealth. Sure, one way of solving this would be simply by not declaring the CG at all (since it's not taxable anyway). But then the difference in one's declared wealth this year and last year will raise tax officer's suspicion that one is possibly hiding a taxable income, and he will get back asking to explain the gap. The question is: how to avoid this? How to do it right the first time off?
You can add a free-text note using EasyTax. Just explain in the note that this isn't inheritance. Basically they want an explanation for any sudden increase in your wealth. You don't have to give them one, but then they may make their own assessment, which if not challenged becomes legally binding.
If you don't want to do it in the software, do it on a piece of paper.
There's a bit of white space after note 50.2 on the ZH tax form where you could write something like:
Sehr geehrter Herr Taxman,
damit Sie mir nicht schreiben müssen, haben Sie sicher bemerkt, dass mein Vermögen um x Millionen gestiegen ist. Dies war ein Kapitalgewinn aus dem Verkauf meiner Tesla-Aktien. (Dieser ist steuerfrei).
Based on my own experience with a US investment account and US/Swiss taxes, what my accountant has me do is provide a summary of the taxable account movement over the course of the year. In my case, this takes the form of the 1099B, a copy of which is submitted with my Swiss tax return, expressly to stave off any concern about fluctuations in income/cash flow. Since it is an official document, it makes a stronger case than just a random note where you claim a particular income from stocks. This 1099B form seems to be sufficient, because the Vaud tax authorities have never questioned it.
On the ZH Wertschriftenverzeichniss you can list the positions you closed during the year. Further, your bank might provide you with a detailed end of year performance statement.