Usufruct property - US

Finance, Taxes, Banking, Insurance and Retirement
1
Hello,

I own a property in the US and had to declare this on my Swiss Taxes, but I received a letter saying that if it is a registered usufruct then it is not taxable under Swiss Tax Law.

The situation is that I have a family member that is living in the house at no cost without a contract. Does this make it taxable here in Switzerland? And if so, taxed on what?

2
Could you draw up a contract with the person living in the house?

Our situation was a tad different in that the property was not Usufrucht, but after inheriting the ILs house we let friends of theirs live in the property rent free, according to the ILs wishes. Their wish was not in their testament, but rather something we had discussed.

We then ran into a hitch with the insurance company. To comply with insurance issues for a non-owner occupied property in the state of Indiana, we ended up drawing a contract, renting the house to the friends for the nominal amount of one dollar per year. That satisfied both the insurance company that we were indeed landlords so could take out an appropriate policy, and even more important, satisfied the Swiss tax folks that the property was not for our use.

We simply wrote a letter to the gentleman at the SZ Steueramt explaining the situation, included our contract. The gentleman thought it odd, but perfectly legal. We reported the rental income of one dollar, and that was that.

If you could draw up a similar agreement, perhaps that would be enough for your Steueramt. A quick discussion of the situation with the relevant bureaucrat should give you an index of what the Steueramt wants from you to make if official.

Our case turned out to be very simply fixed, hope yours is as well.

3
Surely you had to declare the value of the house as part of your fortune, no??? We have always been told here that a sympathetic rental price still had to be 'realistic'.

4
as far as I know this is to be declared by the beneficiary of the usufrutto and not the naked owner

5
wow- the house belongs to the inheritors, so the value has to be delcared, no? Even if the house is 'rented out' for silly rent.

6
Maybe declare, but it's not added to your wealth for wealth tax at least that's what the law in my canton says. After all, you are not the one generating income out of it. You should check the tax law in your specific canton though.

7
So from my understanding, this is only taxable from a wealth tax point of view since I receive no income on it? Also, there is a tax treaty for this between the US and Switzerland?

https://www.taxolution.ch/taxation-o...erties-abroad/

I suppose I should write up a contract here for this as you mentioned, but how did you go about doing it? Any templates you can refer me to?

I actually did have a fire in the house last year, but there was no issue for the insurance company as my family member was living there.

Thanks!

8
If you are paying property tax on it in the country where it is located, you will not pay wealth tax on it here BUT the value of it will up your wealth tax bracket for the wealth that you are taxed on.

Tom

9
Yes, this thanks- 'fortune' = wealth. Even if you don't get revenue from this, and you pay local property tax (as we do in UK for our place there) the value of it is till part of your 'wealth'.

10
from a pure valuation perspective, the value of a property is mostly in the near term rental stream. if this is eliminated due to an agreement, say, to pay only $1 a year for the next 30 years, the discounted future value of rents beyond that and the reversionary value will be very small.

11
But you do NOT pay Swiss wealth tax on it, it just ups your tax bracket.

Tom

12
Ok this does make sense, but now I'm asking myself if I should create an official lease agreement or not. I think I will do it noting 0$ rental just to satisfy the Swiss tax authorities because for some reason without this agreement it would be taxable. That is still not clear to me as to why

13
Just to stress:

You need to satisfy your tax authority, not 'the' tax authority.

How my cantonal tax official ruled on our situation might be different from what your cantonal tax guy rules on your situation, and what is needed to satisfy your Steueramt might be different from what I needed to do or what documents I had to give mine.

What you really need to do is to discuss your individual situation with your Steueramt. and then do what they recommend. Call them, tax folks here tend to be friendly and helpful.

14
To add to meloncollie's comment, the tax regulations on "favorable rent" vary from canton to canton. The below linked article indicates that charging 50% of the imputed rent/ Eigenmiete (which can be calculated as 70% of the market rent) is a safe haven in some cantons while in others it is not.

The article concludes (translated):

"Conclusion: Observe cantonal regulations

Anyone wishing to make their property available to others at a favorable rental rate should pay attention to the respective cantonal regulations. Where the imputed rental value is calculated favorably and where the rent may be up to 50 percent below this imputed rental value, one can confidently forego rental income in favor of another without incurring tax disadvantages. In other cantons, however, a favorable rent can be expensive - for landlords and for their tenants."

https://ratgeber.immowelt.ch/a/vermi...euerfalle.html

15
Good morning,

I have a question about taxes on overseas properties and found this thread to be more or less in line with the subject. Maybe someone is kind enough to help me figure out how to proceed.

My parents, residents in Spain, changed the name of two properties they own in Spain to myself and my sister, they do however still have the usufruct of the two properties meaning I cannot use or profit from them.

I would like to know how do I declare this and if this will increase my wealth tax bracket moving forward. I live in Geneva.

Thanks in advance.

16
You declare its value as usual and it may affect your wealth tax (check the tables/plot for geneva maybe). I think with usufruct you don't have to declare any valeur locative however (I bet you need some documents to back it up).