In my 3 years of filing taxes in Switzerland I have never been able to claim a refund on the 15% WHT of US domiciled ETFs’ dividends using the DA-1 form.
After discussions with the Vaud tax office I understand that I cannot claim it because I am also discounting my taxable income by the interest on my debt (student loans).
For example (rough numbers):
- CHF 100k taxable income
- CHF 3k interest accumulated over the year on my student loans allows me to reduce my taxable income to CHF 97k. This means approximately CHF 20k taxes due
Then with my DA-1:
- CHF 2k dividends paid back to me (included in the CHF 97k taxable income above)
- CHF 300 (15%) withheld and sent to the IRS in the US
- Since CHF 300 tax has already been paid, this should reduce my tax to CHF 19.7k
However, even though each year I submit this, the tax office replies saying it is not allowed and revises my tax back up to CHF 20k.
So my question: do home owners also get refuted their DA-1 refunds as they are claiming interest deductions on the mortgage already for their taxes? The logic as I understand it being that their interest payments would be lower if they paid off some of the house instead of investing with borrowed funds.
I may swap my ETFs to non-dividend returning investments because right now I am paying 35% marginal tax rate + 15% WHT = 50% tax on any dividends. If we assume 6% nominal returns, 2% inflation, this 3% income tax drag, 0.3% wealth tax drag then I am only getting 0.7% real yields on my dividends and taking huge volatility risk. Something like BRK.B or ES minis 5x my real returns on the dividend portion under these assumptions…