Tax refund via DA-1 denied

Yes, it seems like the Geneva ‘specialist’ thinks it’s L1 WHT, in which case he would be right. However, it’s L2 WHT, which falls under the double taxation agreement. And L1 WHT wouldn’t show up in ICTax or broker statements.

4 Likes

Don’t you just love this bureaucratic nightmare? The tax laws are so complicated that the tax office can’t even properly train their own employees to understand them and apply them properly. Neither you’re at fault, nor the poor tax office employee. With this level of complexity we’re bound to make mistakes time and time again. Just think how unmanageable this would be if we didn’t have IT systems and relied on pen and paper.

6 Likes

Doesn’t seem worth it, but might be good to at least get in writing the justification for which part of the regulation/legislation/treaty allows treating funds differently wrt withholding tax.

They’re definitely confused between L1 and L2 withholding.

2 Likes

Well I would raise the claim also because next year it might be more than just 116 CHF; at the end is just writing a letter and the case will be reassessed hopefully with other experts and/or with more attention

3 Likes

That you for your feedbacks.
I will send them a letter.

I would like to add official sources mentioning it.

I have found S-02.142 document on the subject but only for qualified intermediary (IB).

https://www.estv.admin.ch/estv/en/home/international-fiscal-law/international-by-country/sif/usa.html

It is available in German for the English website but you have also French.
However there is no mention of L1 nor L2.

Have you got a better source for private investor Swiss resident ?

I am reading the main thread but the main source is boggle heads for Canadian investor.

@s-g mentioned another article that should be enough for the us :
https://www.estv.admin.ch/estv/fr/accueil/droit-fiscal-international/international-par-pays/sif/impots-source-selon-cdi/auslaendische-quellensteuern-pro-land.html#-591145893

4 Likes

You could ask which part of the tax treaty excludes dividends distributed by funds.

Showing the dividend distribution and withholding (e.g. dividend report + 1042-S) should be enough to show that you had US sourced dividends.

Fedlex is the relevant ordinance.

5 Likes

I think the 1042-S could be particularly helpful in this case, it clearly states that you are the recipient of the withholding tax (and not the etf provider).

I would also write to the federal tax administration to have their written confirmation that you can claim back the 15% wht for VT and support your claim, there’s a contact form on their website.

3 Likes

I did for 2021. No issue for US witholding tax (shares + ETF), as well as the Swiss additional tax (I’ve a Swiss broker)

4 Likes

Hey there, I recently had the opposite experience than @FunnyDjo. My DA-1 was initially refused (in VD), so I called and they promised to look into it.

It turns out that the “stocks taxation specialist” who processed my demand refused it by mistake. It took them 3-4 days to clarify and they called me back to tell me it is being fixed. Maybe it helped that the person who checked wasn’t the same one that made the mistake (initially they wanted to address me to “my guy” but he wasn’t available).

Anyways, I would encourage you to push back. Not only you will hopefully get your CHF 116.- back but it’s important that our tax people do things right, they are dealing with our money after all! And who knows, it may help others down the line :slight_smile:

10 Likes

A small update on WTH refund, I did exactly the same type of declaration for my VT shares and their dividends for 2022.
nb: I declare them individually in the software for each purchase to calculate the withholding tax amount automatically.
For 2022, it was 325.- and was approved and applied.
For 2021, it was 150.- and was denied. I wire then and send the explanation of the federal tax office but never had an answer.

I had no explanation of what change outside of the tax officer but it’s reassuring for the future.

Apologies for digging out this old threat, topic is still relevant.

Anyone got the non-reclaimable WHT credited from the regular tax bill in the case where the DA-1 reclaim got denied or substanially reduced? How did you do it?

Or even better, successfully challenged the reduction due to mortgage interest? The tax office argues with a federal court ruling (2A.559/2006), which seems to conclude that interest paid doesn’t need to be related to the dividend income.

Just to be sure if i understand what non-reclaimable means here

So the question is for US domicile ETFs. And let’s say Dividend was 5000 CHF. WHT in US was 750 CHF

But after tax office calculations, they only give back 400 CHF on account of mortgage involved in the portfolio

Your question is if anyone was able to get that 350 CHF back?

Yes, it’s about the calculation of maximum DA-1 reclaim. If mortgage interest (and deducted wealth management fees) are high enough compared to the dividends you reclaim WHT on, it gets significantly reduced, leading up to 0 reclaim and hence double taxation.

I read the regulation quoted above as that you could get at least the WHT credited via the regular tax declaration, at least if you don’t file the DA-1 reclaim in the first place.

The question is if the maximum DA-1 reclaim is smaller than the reduction in income tax you get if you deduct the requested DA-1 amount from your taxable income. Not in my case. And I tried it for different income values. So it is still worthwhile for me to execute the DA-1 process.

But it still makes sense to apply wealth management fee deductions to reduce taxable income, instead of increasing the maximum DA-1 reclaim. So I guess it depends on the amounts involved. Calculations required…

1 Like

Here’s a simplified example:

A x B : C Reduction on debt 12’000
A Interest paid 24’000
B DA-1 assets 1’000’000
C Total assets incl. RE 2’000’000
D x E : F Reduction on fees 3’000
D Management fees 3’000
E DA-1 dividends gross 15’000
F Total dividends gross 15’000
Max amount
DA-1 dividends 15’000
Reductions -15’000
DA-1 amount -
Avg. Tax rate 20%
Max amount for reclaim -
WHT paid 2’250

It will always make sense to use the wealth management deduction, as marginal tax rate is applied. Whereas for the DA-1 calculation, the average rate is used.

Question is whether at least the 2’250 of WHT paid could be deducted to reduce double taxation? Depending on your tax rate, it’d still be a few hundred more than 0.

Got it.
In my case I don’t have any mortgage.
So I got all the amount approved. Looks like the math worked out :slight_smile:

Absolutely agree.
I have been looking at these calculations and thinking about mortgage scenario ( potentially in a few years)
With mortgage, it might be meaningful to move to the non US part of the ETF portfolio to UCITS or Swiss based ETFs so you have zero L2 WHT tax compared to 15% on the US domiciled ones. This will reduce your DA-1 relevant assets and DA-1 relevant dividends, so a considerable lower percentage of DA-1 refunds lost. All this while benefitting from the zero L2WHT on non US part and deducting same amount of asset management costs at marginal tax level. Does this make sense ?

1 Like

Using your numbers although some are missing…

if 2’250 * marginal tax rate < max amount for reclaim then execute DA-1 process

I don’t have that much DA-1 dividends yet, so it’s still worth it for me, even if the max amount of reclaim is much smaller than the WHT.
I don’t have a mortgage either.