Workshop by Marco Greter and Nina Blanz on the occasion of the ISIS) seminar on September 23-24, 2024 entitled "Specialties in wealth tax"
Note: This language version is an automatically generated translation. The text may therefore contain linguistic and terminological errors.
view in original language (German)Walter and Liliane Meier have lived in their own single-family home in Winterthur, Canton of Zurich, since 1987. For many years, they had their tax returns prepared by their local accountant. Because the accountant significantly reduced his workload due to his age, they switched to a new tax advisor. Based on his discussions with the new clients and the files, the new tax advisor determined, among other things, the following:
After purchasing their home, Liliane and Walter Meier acquired several works by contemporary artists as furnishings. These included, for example, one lithograph each by Roy Lichtenstein and Robert Rauschenberg, a silkscreen print by Keith Haring, a small watercolor by Gerhard Richter, a work by Hans-Jörg Glattfelder (acrylic on canvas), and a small sculpture by Sol LeWitt. In addition, they supplemented their furnishings with various decorative art pieces lacking potential for appreciation. According to Mr. Meier, the purchase prices for the art objects at the time ranged from CHF 7,000 to a maximum of CHF 30,000. Only some of the purchase receipts remain, and an inventory was never created.
The art objects were not declared in previous tax returns because, according to information provided at the time by the former trustee, they were not subject to wealth tax as household goods. The Meiers did not take out separate art insurance but insured the works under their standard household contents insurance.
Eight years ago, Liliane Meier acquired a painting from her mother’s estate that is attributed to the Chinese artist Li Fengmian, who died in 1991. Her mother had purchased it in Hong Kong in the 1960s for a small sum. When the estate was divided, no appraisal was commissioned; instead, the painting was allocated based on an assumed value of CHF 9,000. Since then, the painting—like the works listed in the main facts—has hung on a wall in the Meiers’ home.
In addition to the household contents insurance, there is a separate art insurance policy with agreed values totaling CHF 400,000. The most valuable single item was insured for CHF 110,000.
Peter Huber, a certified engineer, works as a management consultant for the machinery industry. He specializes in analyzing production processes for corporate clients and providing recommendations for improving manufacturing processes. In addition to his consulting work, he is able (thanks to his excellent business relationships) to broker machines and other technical equipment for clients both domestically and abroad on a commission basis. The nature of his work means that he typically performs his duties at the clients’ premises. He has no employees and maintains only an office in his own home. Administrative and accounting tasks are handled by a fiduciary on a contractual basis.
Peter Huber converted his sole proprietorship into a stock corporation as of January 1, 2020. The company continued to perform well, and he generated net profits of CHF 867,000 (2020) and CHF 1,072,000 (2021). He received a gross annual salary of CHF 150,000. Recently, he received his 2021 personal tax assessment from the cantonal tax administration, which included a standard form stating the taxable value of the Huber Consulting AG shares at CHF 7,567,000 (see attachment: Share Valuation). Since the tax value of his former sole proprietorship was always below CHF 100,000 and nothing had changed economically in the business, Mr. Huber is very surprised by the significantly higher wealth tax and intends to file an objection.
Hanspeter Müller was lucky enough to purchase an older 5½-room condominium with a garage space in Zurich-Hottingen. The apartment is relatively well-maintained and only needs to be repainted. Although the price of CHF 2,450,000 was high, the real estate agent assessed it as being in line with current market prices in this region. Mr. Müller is pleased that he was awarded the contract.
According to the 2009 property valuation received from the seller, the property tax value of the condominium unit is CHF 630,000, which Mr. Müller had declared accordingly on his tax return. Now he has received an assessment decision increasing the tax value to CHF 1,710,000. He is completely surprised by this and suspects an error on the part of the tax commissioner.
Mr. Müller has spoken with his neighbor, Ms. Huber, about the increase in the tax value. Ms. Huber lives in the same building in a 5½-room condominium with an identical floor plan (including a garage space). She cannot believe that the assessed value in Mr. Müller’s tax assessment has been raised so significantly, because according to her own assessment, the assessed value remains at CHF 630,000. Now Mr. Müller feels even more unfairly treated.
Joana Keller, a resident of Schaffhausen, is a wine lover and has been vacationing in Piedmont for many years. In 2022, she is able to purchase a condominium in the city of Asti in Piedmont for EUR 460,000, equivalent to CHF 450,000.
In Joana Keller’s tax return, her tax advisor declares the apartment in Asti with a property tax value of CHF 315,000 (equivalent to 70% of the purchase price; analogous to the valuation of domestic real estate). In the 2022 tax assessment, however, the apartment was valued at CHF 360,000 (equivalent to 80% of the purchase price). Ms. Keller trusts her tax advisor’s legal judgment and files an objection to the valuation of the Asti apartment.
Werner Uhlmann lives in his own single-family home in Wiesendangen/ZH. A few years ago, he was able to purchase the undeveloped neighboring property (approximately 1,000 m²) located in the building zone, which continues to be leased to a neighboring farmer. Three years ago, he also inherited a meadow on the outskirts of Gachnang/TG. The approximately 25-are plot is used for agricultural purposes by the current tenant. It was once separated from a farm and is no longer subject to the Federal Act on Agricultural Land Law (BGBB).
The owner-occupied house has a property tax value of CHF 950,000 and is encumbered by a mortgage of CHF 450,000; the two agricultural properties are unencumbered. Mr. Uhlmann declared the latter in his 2021 Zurich tax return in accordance with § 40 StG ZH and the Directive of the Government Council to the tax authorities regarding the valuation of real estate and the determination of imputed rental values effective from the 2009 tax period, dated August 12, 2009 (ZStB No. 21.1; hereinafter “2009 Directive”) based on the type of use, with an income value of CHF 1,000 and CHF 2,500, respectively (2009 Directive, margin note 1 et seq., esp. margin note 2, last sentence).01
When Werner Uhlmann receives the Zurich tax assessment for the 2021 tax period, he notes that while the income approach valuation was accepted for his neighboring property, it was not accepted for the property in Gachnang/TG. According to the assessment decision, the Thurgau market value (taking into account the apportionment difference) of CHF 450,000 was used as the basis. Mr. Uhlmann is outraged that, contrary to the clear wording of the 2009 directive, the income value is not being used for the wealth tax and criticizes the inequality of treatment, particularly because this was accepted without question for his neighboring property under identical circumstances.
Questions
01 Directive 2009, Marginal No. 2: In addition to farmsteads, properties advertised as agricultural include, in particular, smallholdings as well as properties with the necessary buildings used for tree nurseries, flower nurseries, vegetable gardens, or chicken farms. Individual plots of land used for agricultural or forestry purposes are also assessed based on income value.
Hans Goldgrund has been retired since 2019. Prior to his retirement, he operated a gemstone cutting business and traded in diamonds and jewelry through his self-controlled corporation. As compensation, he received an average annual salary of CHF 300,000. Furthermore, the corporation paid him a dividend of CHF 200,000 every few years.
In 2019, Hans Goldgrund sold the shares of his self-managed corporation to a third party for CHF 8 million. Hans Goldgrund invested the entire proceeds from this sale in gold. Due to the very favorable price trend of gold, it is now worth CHF 12 million.
Upon his retirement, Hans Goldgrund also withdrew his entire occupational pension savings as a lump-sum payment (approximately CHF 2 million). He needs this money to cover his living expenses, as he has little income other than his AHV pension. For this reason, he has invested only a small portion of it in securities. The remainder is in his bank account.
Based on his recently filed tax return, Hans Goldgrund has the following income and assets in 2023:
Income:
AHV CHF 29,400
Imputed rental value CHF 18,000
Income from securities CHF 12,000
Taxable income (after social security deductions): approx. CHF 56,800
Assets:
Bank deposits CHF 2.5 million
Gold CHF 13 million
Real estate CHF 1.5 million
Taxable assets: CHF 17 million
His provisionally calculated state and municipal taxes in Zurich amount to CHF 106,000.
Mr. Goldgrund did not sell his corporation but hired a managing director. Thanks to his large and loyal customer base, business continues to go very well, and the corporation is valued at CHF 8 million by the Canton of Zurich in 2023. No dividend was distributed, although this would have been possible based on the annual profit of approximately CHF 300,000.
Mr. Goldgrund’s income and asset situation is as follows:
Income:
AHV CHF 29,400
Imputed rental value CHF 18,000
Income from securities CHF 12,000
Assets:
Bank deposits CHF 2.5 million
Stock corporation CHF 8 million
Real estate CHF 1.5 million
His provisionally calculated state and municipal taxes in Zurich amount to CHF 75,000.
Mr. Goldgrund’s income and asset situation is as follows:
Income:
AHV CHF 29,400
Imputed rental value CHF 18,000
Income from securities CHF 12,000
Assets:
Bank deposits CHF 300,000
Real estate CHF 1.5 million
Monet painting CHF 20 million
Mr. Goldgrund inherited the Monet painting. As part of the estate distribution, a market value of CHF 20 million was assumed. The painting is not insured, as the insurance policy would be too expensive for Mr. Goldgrund.
His provisionally calculated state and municipal taxes in Zurich amount to CHF 139,000.
