Tax-free household goods or taxable assets?

Every year when completing the tax return, the same question arises: Does the expensive silver cutlery belong to the household or is it taxed as an asset? The answer is not easy and can vary from canton to canton.

A basic distinction is made between personal effects, household effects and capital investments (assets). Household effects and personal effects are not considered assets and are therefore not subject to wealth tax (Art. 13 para. 4 StHG) - they are therefore exempt from tax.

What belongs to the household according to tax law?

Household items can include all objects that are part of the usual furnishing of an apartment or a house. Usually this includes furniture, carpets, paintings, kitchen and gardening equipment, dishes, books, computers, TV, stereo, any consumer electronics and others.

Personal items are objects that are actually used in everyday life. These include clothing, jewellery, sports equipment, musical instruments, photo and film cameras and more.

Securities, gold and other precious metals, life insurances, motor vehicles, ships, aircrafts, horses and valuable collections of any kind are clearly considered to be capital assets.

However, the distinction can be very difficult to make, especially in the case of goods such as pictures, jewellery, carpets or crockery, as it defines both as household effects and as capital investments could become. These items are called alternative goods. In the Canton of Lucerne there is no limit on the amount above which an item becomes taxable. When deciding whether which is now tax-free or not, the actual use is taken into account. Thus the expensive silver cutlery can belong perfectly in the household goods, as long as it is regularly used in everyday life is used (tax-free household). However, if it is carefully stored in a safe deposit box, it is not suitable for everyday use and instead has a clear Investment character. Another indicator for the classification is the share of an object in the total assets. The larger this share measured in terms of the total assets of the taxable entity, the higher the chance that it will be subject to wealth tax. Under this standard, the appropriate value of the furnishing of a dwelling is also linked to the economic amount of money measured to the person's circumstances.

Which assets do I have to declare and how?

When an item is classified as a capital asset, it must be declared in the tax return, including its insurance and market value. Is the value unknown, it is to be estimated reasonably. If an undeclared asset is discovered by tax authorities or a notable profit results from the sale of such an undeclared item, there is reason for subsequent and criminal tax proceedings due to attempted tax evasion. The fine can thereby be as high as 100% of the evaded tax. Through early self-disclosure the penalty can usually be reduced to one fifth of that amount.

In case of doubt it is therefore advisable to consult with a qualified tax specialist.