DA-1 forms: What is the max ammount of dividend tax I can get back?

So I was not able to find this information and I thought I would ask here.
Every year I fill out a DA-1 Form to get my Taxes from my dividends back. This works every year but my dividends are getting bigger and I am wondering where is the limit for tax returns.
I am living in Canton Zürich, married, have a C Permit.
Does anyone know what is the upper limit of tax returns from DA-1 if I pay lets say 20K taxes every year? I do not have any other tax returns beside the “portfolio management” tax deduction.

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Why would there be a limit?

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Lets say I pay 20K taxes, get 50K in dividends of which 15K is witheld. Now I cannot imagine that I can reclaim 15K tax just like that.

there is one.
dont pin me down on the exact amount, but of the 15% already paid you get back maximum your swiss due taxes. i.e. your tax rate must be above 15% to get refunded everything

Ah yeah sorry was assuming tax rate >15%. Does it happen in practice?

At least don’t think it would happen with OP’s example. If the tax rate is less than 15% and they pay 20k in taxes, they’d earn >130k (+50k dividend). I doubt any Canton has such low rates.

Your tax papers returned by canton from past years (specifically touching WHT refund) should likely contain such calculations.
I remember I got one from BS for 2019/2020, and they first calculate the threshold (max allowable deduction amount), and then apply it to whatever was accrued ( accepted=min(threshold, accrued amount) ).

Didn’t run the full reverse engineered math behind it, but I believe it was related to your marginal income tax rate.

How about someone that retired early with 3M in assets and 70k in dividends (only source of income) of which 11k are withhold? Will he basically pay 0 taxes and get everything back?

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I always get this in my tax return. As a reminder, in Vaud we file the DA-1 together with the tax return:

IMPÔT ANTICIPÉ - RETENUE SUPPLÉMENTAIRE USA -
IMPUTATION FORFAITAIRE D’IMPOT

Décision de rejet partiel ou total de votre demande (article 52, al. 3 LIA).

Après contrôle de votre demande, nous vous informons que le droit au remboursement est réduit aux montants indiqués plus haut pour les motifs suivants :
Le montant maximum de l’imputation d’impôts étrangers retenus à la source ne peut excéder la somme des impôts suisses frappant les rendements en cause après déduction des intérêts passifs y afférents et des frais liés à leur acquisition (art. 8 à 11 de l’Ordonnance du Conseil fédéral du 22 août 1967 en la matière)

Unfortunately that ordinance is not translated to English, but you can find articles 8 to 11 in French and in German.

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Example calculation for a single person in Zurich as I understand it:

Expected deductions: 9’000 (0.3% for asset management) + 2’600 (health insurance)
Taxable income: 70k - 9k - 2.6k = 58’400
Total income tax: CHF 6’586 => Tax rate 11.3%
Total wealth tax: CHF 11’362

US WHT: 15% of 70k = 10’500
Taxable income from assets: 70k - 9k = 61’000 (dividends minus asset management)
Swiss taxes for income from assets: 61’000 * 11.3% = 6’879
That’s the maximum that you can get back via DA-1, which is lower than the 15% in this example. There is an additional cap which is the total income tax in Switzerland, which is slightly lower in this case (due to the health insurance deduction and no other income). You’d only get CHF 6’586 = 9.4% back in this example.

In total you would pay CHF 21’862 in taxes, CHF 10’500 in the US as WHT and CHF 11’362 (wealth tax) in Switzerland. Depending on the share of US stock in the 3M, (partly) switching to Ireland-domiciled ETFs would be better for you and Switzerland (I haven’t done the math on that).

See also https://www.estv.admin.ch/dam/estv/de/dokumente/vst/merkblaetter/da-m.pdf.download.pdf/da-m.pdf

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IIRC it’s capped at 6k, beyond that you need to justify it (and not sure the fund TER is actually a valid justification).

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Right, I forgot about that cap, I’m not at 2M in ETFs yet. It changes the numbers slightly but the explanation of the calculation should otherwise still make sense.

Sorry to ask, but what is this 0.3% asset management deduction?
Is it peculiar to ZH or does it exist in other cantons?

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Effective management and custody costs of securities that are held by a third party (e.g. a broker) can be deducted in all cantons, as far as I know. This does not include transaction costs, though.

Instead of deducting the effective costs (with supporting documents), you may be able to deduct a flat fee. In ZH the accepted flat fee is 0.3% of the total worth of securities held by brokers, capped at CHF 6’000. This is described in the Wegleitung. Other cantons may have different rules about what flat fee deduction they accept (if any).

Theoretically, you’re right. US stocks in an US ETF and ex-US stocks in an Irish ETF would be ideal from a tax perspective. Unfortunately, an Irish ETF for World ex US doesn’t exist, as far as I know. I think this was discussed in another thread here. I.e. you would have to construct your ex-US allocation from multiple ETFs, which is inconvenient and may come with increased transaction costs, at least if you want to cover the whole world.

For the lazy investor it may thus be preferable to switch to an Irish All-World ETF. However, your Swiss tax rate might have to be very low for this to be worth it compared to VT. I haven’t made the calculation for the threshold.

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As far as I know, management cost would be deductible as well if you had your portfolio managed by a third party wealth manager (or a robo advisor) instead of directly investing using a broker. But all transaction costs would have to be excluded as they are not deductible. There isn’t always a clear separation with an all-in-fee.

In my opinion, the management fee of a fund (but not the fund’s transaction costs, i.e. a bit less than full TER) should fall in the same category as management by a wealth manager. That said, I suspect it might not get accepted. However, I’m happy to apply the flat 0.3% deduction (ZH) even if the majority of my management costs are fund management costs.

Given the low TER of passive funds, you’d need quite a sum so that even the TER costs would get higher than 6k (max of the flat deduction) :slight_smile:

Well, it’s a cantonal thing, but for Vaud this statement does not apply:

Frais d’administration de titres Code 490
Il s’agit notamment des frais de garde et d’administration ordinaire des titres et autres placements de capitaux, frais de dépôt, frais d’encaissement, frais d’affidavit, etc. N’est par contre pas admise la déduction de frais qui ne concernent pas l’administration proprement dite (par ex. commissions et frais pour l’achat ou la vente de titres, frais pour conseils en matière de placements ou en matière d’impôts, honoraires de gestion). Par mesure de simplification, l’autorité fiscale admet, en règle générale, sans justification, une déduction forfaitaire correspondant à 1,5‰ de la valeur des titres et autres placements de capitaux privés déclarés sous code 410, dont la gestion est confiée à des tiers.
Ne sont pas admises : la rémunération du travail personnel effectué par le contribuable et la déduction des frais pour l’établissement de la déclaration d’impôt et de ses annexes, etc.

Bold text is mine. This is coming from the 2021 general instructions.

Translated, it means that you can deduct maintenance fees, but neither transactions costs nor wealth management costs are deductible. Thankfully, if you are mustachian, the fixed 1.5‰ will actually be higher than your actual cost.

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You mean deductible from income to determine taxable income or do you mean something else?

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Today I received the answer for 2020 and they are granting me 20% less then what I had requested.
The letter doesn’t have any detail on the calculations, only what they are granting and the reference to the law.
I checked and my tax rate (federal+cantonal+city taxes) was 15.61, so I’m not sure exactly why they are granting me less…

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My guess is that wealth management cost (and/or mortgage/loan interest) deductions reduce the effective tax rate for investment income. E.g. deducting 0.3% wealth management costs while earning 1.5% dividends would result in a 20% reduction of your effective tax rate for investment income. And then you’re clearly below the 15% US WHT.

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