Tax refund via DA-1 denied

Taxes
1

My sole investment in 2018 was VT of which I detailed the dividend payments in a DA-1 form.

The Canton de Vaud Office d’Impôt has now got back to me on my tax filing and said that I cannot write off the 15% VT WHT and asked me to pay that extra amount in Swiss tax.

The exact wording of the letter is:

Chapitre impôt anticipe, USA. IFI
La convention de double imposition entre la Suisse et les Etats-Unis ne porte pas sur les rendement de fonds de placement.

which I understand roughly translates to

Withholding tax chapter, USA. IFI
The double taxation agreement between Switzerland and the United States does not apply to returns on mutual funds.

My confusions:

  1. VT is an ETF not a mutual fund (or can fonds de placement also translate to ETF?)
  2. There is no tax on “returns” as they are unrealised and no capital gains anyway? So assuming they mean dividends…
  3. My understanding was that DA-1 and 15% WHT double taxation negation applied to VT as a US domiciled ETF. Am I missing something here?

Greatly appreciate any advice. At the bottom of the letter it says I can write to them to dispute within the next 30 days which I’m thinking I should because it seems wrong to me.

2 Likes
2

This remark is wrong.
Where do you hold your VT in a foreign bank?
Have you declare your VT in the stock section? or mutual fund?

3

Fonds de placement means investment fund not mutual fund so technically an ETF is an investment fund. It’s weird they say it doesn’t apply though.
@wapiti where would you declare it? I would put it in investment fund…

4

In the Vaudtax software, for the DA-1 refund, the only possible choice is “Actions” (Stocks). But to declare your ETFs and dividends, it’s going to be in the “Fonds de placement” section.

In any case, ETFs are covered by the double imposition treaty. You should try to call them first.

5

Did you send documentation with your taxes? (e.g. the 1042-S).

6

The only document for the Swiss tax administration needed is DA-1 if the stock is hold outside Switzerland and traded in US

7

Wrong.

1042-S is proof that the entire returns paid by VT are dividends. It is also proof of withheld tax.

Tax office is denying deduction because they don’t know that the entire payment was dividends.

OP should send the 1042-S, a printout of the ictax page for VT (further proof of dividends), and Vanguard’s dividend documentation for VT.

8

Yes, the 1042-S contains this info and is the “official document”. However, on my knowledge and practice in most cantons including Vaud, a statement of the broker would be enough as the info would also be there. But each canton is different.

For info, the 1042-S can be found under report -> tax on interactive broker

Also, on the ower message, the administration doesn’t say that no withholding tax has been applied. It said that the investment funds are not eligible for the refund.

9

I hold VT with Interactive Brokers and declared it in the Fonds de Placement section IIRC.

I did send them the 1042-S which shows the dividends and amount of tax withheld in the US.

It seems their message here is that even with receipt/acknowledgment of that the double taxation treaty does not apply o_O.

Thank you for the recommendations. I think I will look write to them and include those details.

10

Hi @hippo,

Do you have an update from the tax office?

Currently, I am struggling with the same problem in ZH. Today I received the following answer regarding my enquiry:

Gemäss Rücksprache mit unserer Fachstelle “Pauschale Steueranrechnung” kann ich Ihnen wie folgt antworten:
Gemäss DBA CH-USA kann Im “Normalfall” auf Erträgen von Anlagefonds keine Pauschale Steueranrechnung mittels DA-1 geltend gemacht werden.

Was anyone successful trying to get the 15% withholding tax back with a DA-1 form for a US fund like VT or VTI?

11

So what would happen instead? You would pay 15% to the US tax office and pay your regular income tax on the remainder?

12

I’ve done it every year for past few years, just received the 2018 DA-1 reimbursement from the tax office a few weeks ago.

13

If you do that you should at least get taxed on the net dividend.

14

I am not a lawyer but I would mention this:
https://www.estv.admin.ch/dam/estv/de/dokumente/verrechnungssteuer/merkblaetter/da-m.pdf.download.pdf/da-mf.pdf

Also the DBA mentions https://www.admin.ch/opc/de/classified-compilation/19994069/index.html on article 23 b)
“Bezieht eine in der Schweiz ansässige Person Dividenden, die nach Artikel 10 (Dividenden) in den Vereinigten Staaten besteuert werden können, so gewährt die Schweiz dieser Person auf Antrag und vorbehaltlich des Buchstabens c) eine Entlastung. Diese Entlastung besteht”

The definition of dividend as per Art. 10 4)

“4. Der in diesem Artikel verwendete Ausdruck «Dividenden» bedeutet Einkünfte aus Aktien oder anderen Rechten - ausgenommen Forderungen - mit Gewinnbeteiligung sowie aus sonstigen Gesellschaftsanteilen stammende Einkünfte, die nach dem Recht des Vertragsstaates, aus dem sie stammen, den Einkünften aus Aktien steuerlich gleichgestellt sind.”

Based on this article, you should be refunded…
Also, On my knowledge, ETF and stocks are treated by the IRS the same. (This is not the case for mutual fund).

15

Also maybe attach your 1042-S, that’s should be the documentation for the withheld amount.

16

Just a guess, but could there be a confusion between “Pauschale Steueranrechnung” und “Zusätzlicher Steuerrückbehalt USA”?

For example Wegleitung for DA-1 in Zurich:

“Dieses Formular dient einerseits als Antrag auf pauschale Steueranrechnung für die im Jahre 2018 fällig gewordenen Dividenden und Zinsen und anderseits als Antrag auf Rückerstattung des zusätzlichen Steuerrückbehaltes USA, der in der Schweiz vom Ertrag amerikanischer Aktien und Obligationen abgezogen worden ist.”

(Though Vaud seems to provide separate forms, while Zurich has consolidated them into one)

17

Hi @ElMago

Sorry for the delay in reply I’ve been on holiday.

Unfortunately, I have not heard back from the tax office yet. I have sent them in a letter clarifying that the 15% reclaim is on dividends of a US domiciled stock, not the returns of it.

I attached to this my 1042-S, the federal ICTAX calculator, and the legislation posted on VaudTax website.

I’ll update here when I hear back.

1 Like
18

Thanks for all your replies. After many phone calls I finally talked to the right person. Since the WHT is reported to the Canton but the data (ICTax) is managed on the federal level, it was a bit of a struggle.

Unfortunately, in ZH they will you not allow to automatically fetch the data for funds in the DA-1. However, It is ok to have a single position per fund with number of shares you own at the end of the year and the total withheld tax.

This means

  1. Add 1 statement per US ETF to the DA-1
  2. Use the number of shares you own EoY
  3. Add the total WHT for the fund from the IB Dividend Report
  4. DA-1 will be printed with two copies, send the original with the Dividend Report to the address printed on the form (add 1042S if you like)

Hope this helps. I will update this if I run into problems.

11 Likes
19

Only if you use the ZH tax software. Dr. Tax doesn’t have this issue apparently. Some Kanton’s white-label Dr. Tax, for others you can buy it fairly cheap.

1 Like
20

Forgot to update this but I did get a response from the tax office.

Because I have outstanding overseas student loans I am able to write off the interest of these from my taxable income.

However, this means I can’t claim the 15% DA-1 reimbursement for US WHT on earned income.

I guess they don’t want you writing off interest on one side while earning interest with your savings in another way :man_shrugging:

Perhaps when my outstanding student loan is lower and/or my dividends earnings are higher I will be able to reclaim some.