Save on taxes effectively. Use these tips to complete your tax return.
Each year, Swiss taxpayers need to complete their tax returns. This can certainly become complicated depending on their personal background and financial situation. If you use these tax return tips to properly declare your income and assets, you can save on time and taxes.
For many taxpayers, completing their tax returns is more of a tedious task than a pleasure. However, anyone who keeps track of the possible deductions and the specific rules at the federal, cantonal, and municipal level is ideally positioned to benefit from tax saving opportunities.
Claiming deductions for asset management costs
Management fees for securities safekeeping accounts are tax deductible. This generally applies for other expenses incurred as part of asset management, as well. These may include the following:
- The cost of safe deposit boxes.
- The cost of preparing tax statements.
- The cost of transferring securities.
- Expenses for claiming reimbursement of foreign withholding taxes.
- Negative interest rates.
By contrast, the following may not be deducted in particular:
- The cost of financial and investment advice.
- Transaction fees (brokerage fees).
- Federal stamp tax on transfer of securities.
It is important to note that the deductibility of specific bank charges varies in some of the cantons. The regulations on any flat-rate deductions for asset management are also determined by the cantons. We recommend checking the respective guides and information sheets in the canton where you live.
Tax-free capital gains on financial investments
You are often not required to pay tax on the total income earned from different investment products, particularly structured products and investment funds. The earnings component can be split in two: taxable earnings and capital gains, which are tax exempt for private assets. The Federal Tax Administration (FTA) releases price lists each year where taxpayers can find the respective information for their investments to include on their tax returns.
With the Credit Suisse tax statement (PDF), you can spare yourself this work. You no longer need to make these clarifications yourself and can forgo the tedious task of completing the statement of securities since the tax statement gives you a concise summary of all your tax-relevant data, which allows you to complete your tax return without any hassles.
Declaring non-Swiss accounts
Accounts held with non-Swiss banks and securities safekeeping accounts held outside Switzerland must also be declared on your tax return. Regarding the latter, it should be noted that foreign safekeeping account lists do not necessarily account for all Swiss tax regulations. This is true for tax-exempt repayment of capital contributions, for instance. We thus recommend that you compare your reported earnings with the FTA price list. This will allow you to avoid any incorrect information.
Claiming reimbursement of foreign withholding taxes on dividends and interest
With foreign securities, the respective country of origin often collects withholding tax on dividends and interest. This varies from country to country and can reach 30% or more. If the other country has a double taxation agreement with Switzerland, you can generally claim at least a partial reimbursement of the withholding tax. The process of claiming reimbursement varies based on the country of investment and can be painstaking and time consuming. Through its Tax Claims Services, Credit Suisse thus offers a comprehensive service for claiming reimbursement from key investment countries such as Germany, France, the United Kingdom, and Italy.
Note: It is not always possible to claim reimbursement of the entire withholding tax. This money is not lost, though. You can claim it on the statement of securities on your tax return (form DA-1). The tax office then reimburses the corresponding amount or offsets it against your tax liability.
Taxing children's savings accounts
Assets and earnings in children's savings accounts have to be declared on tax returns. If the account is held in the name of the child, it is allocated to their parents for tax purposes until they reach legal age. This does not apply if a godparent, grandparent, or someone else opened the savings account in their own name on behalf of the child. In such cases, that person has to pay taxes on the account assets and earnings.
Taxation of cryptocurrencies
Cryptocurrency holdings must be declared on the statement of securities and be taxed as assets. The FTA lists the respective taxable value of the most common cryptocurrencies on its "Foreign currency – Bank notes" price list. If the activity involves more than simply holding and selling (e.g. mining, staking, airdrops etc.), we recommend contacting a tax specialist.
Value-maintaining and value-enhancing real estate expenses
Real estate expenses used to maintain the value of a property are tax deductible. This applies for the following expense items:
- Maintenance costs.
- The costs to repair newly acquired real estate.
- Insurance premiums.
- The costs of third-party property management.
Investments in energy-saving and environmental-protection measures are generally equivalent to maintenance costs and are deductible at the federal level and in most cantons, as are demolition costs for a replacement building.
Note: Instead of deducting the effective cost, a flat-rate deduction is also possible in each tax period. If the deductible costs exceed the flat rate in a tax period, it may be worthwhile to schedule additional maintenance work ahead of time – this allows you to benefit from the flat-rate deduction once again the following year. There is a benefit to staggering major renovation work over several years, though. This gives you a lower tax rate and thus saves tax. Personalized planning with an expert is recommended for any major construction projects.
The situation is different for all other value-enhancing real estate expenses. They are not deductible from your taxable income but can be deducted from real estate gains tax when selling the property.
Deductible debit interest on mortgages
Mortgage interest can be deducted from your taxable income as debit interest. As a general rule, mortgage interest is fully deductible. The maximum deduction for debit interest is capped at CHF 50,000 over the total taxable return on assets.
Early repayment penalty for repaying a mortgage
The bank typically charges an early repayment penalty when you repay a fixed-term mortgage ahead of schedule. According to federal case law, this penalty can only be deducted from income tax as debit interest if the repaid mortgage is replaced by another one at the same financial institution. By contrast, the early repayment penalty can be deducted from the taxable earnings under the real estate gains tax if it is incurred in connection with the sale of a property (investment costs).
Declaring vacation homes in Switzerland and abroad
You are also required to declare the value of vacation homes in another canton or other countries and any income generated from them on your tax return. The property value and the income resulting from property are not taxed in the canton of residence, but they do determine the tax rate.
These properties are only taxed where they are located. For the tax allocation required in such cases, it should be noted that the tax office distributes all debts and debit interest proportionally among each domicile based on the "location of the assets." If you own property outside Switzerland, this may mean less debt interest tax relief in Switzerland and thus higher taxes.
Purchasing pension benefits and Pillar 3a deposits
You can make a voluntary purchase if you have a 2nd pillar pension gap. This may also have tax benefits since the amount can be deducted from your taxable income. The assets and any revenue in the tied pension provision are also tax exempt until they are paid out. Keep in mind, though, that there is a three-year blackout period on lump-sum withdrawals from the pension fund after you make a deposit. If you withdraw funds before then, you will have to pay back the tax savings.
Deposits into Pillar 3a are also tax deductible. However, there is an annual cap. Gainfully employed persons with a pension fund can deposit up to CHF 6,883 in 2022. Gainfully employed persons without a pension fund can deposit 20% of their net earned income up to maximum of CHF 34,416.
Business expenses and COVID-19 rules
Business expenses are deductible, including the costs of travel to and from work as well as additional costs for meals on business trips. Due to the sharp increase in people working from home since the outbreak of the COVID-19 pandemic, the cantons have reviewed their rules concerning this and published corresponding practice guides.
In several cantons, such as Zurich, taxpayers can continue to claim their business expenses as if they were incurred without COVID-19 measures. In such cases, days worked from home due to COVID-19 are not deducted from your business expenses. However, this means any expenses incurred for your home office costs cannot be deducted, e.g. for your work space at home. In order to find which particular solution benefits you the most financially, we recommend carefully comparing the expenses and checking the respective instructions from your canton of residence. The Swiss Tax Conference (SSK) has released an overview of the cantonal rules.
Training and development expenses
Expenses for professional training and development can be deducted from up to a total of CHF 12,000 as regards the direct federal tax. The deductible amounts for cantonal and municipal taxes differ based on each canton's laws. Taxpayers are generally required to have already completed their higher secondary education, however.
Expenses for childcare are generally deductible for any children aged 14 and under who live in the same household. Up to CHF 10,100 can be deducted per child each year as regards the direct federal tax. This cap will increase to CHF 25,000 as of January 1, 2023. The maximum deduction for cantonal and municipal taxes is based on cantonal regulations.
Donations to charitable organizations and political parties
Donations to tax-exempt charitable organizations domiciled in Switzerland are tax deductible. The maximum deduction for federal taxes is 20% of your net income. The cap in each canton is determined by cantonal law.
Contributions to political parties in Switzerland are also tax deductible under certain conditions. You can deduct up to CHF 10,100 as regards the direct federal tax, while the cap for cantonal and municipal taxes is based on cantonal law.
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Tax treatment depends on the individual circumstances of each client and may vary over time. This material does not contain tax advice of any kind. You should consult with a professional tax advisor as you deem necessary.