Capital payment as maintenance contribution

Maintenance contributions are paid regularly or irregularly to cover ongoing needs and must not cause an increase in assets for the beneficiary. However, capital payments are not included, even if they are used for maintenance purposes.

When a marriage breaks down, post-marital support is often owed. For tax purposes, maintenance payments can be deducted from the income of the payer and are added to the income of the recipient. As such, maintenance contributions in the sense of the tax law are maintenance and support contributions, which are paid regularly or irregularly to cover ongoing needs and do not result in an increase in assets for the beneficiary. Capital payments, on the other hand, are not included as they cause an increase in assets, regardless of whether they are used for maintenance purposes.

The Federal Court ruled on August 10, 2017 (2C_567/2016, 2C_568/2016) on a case involving a taxpayer in the canton of Geneva. The spouses A.A. and B.A. separated de facto in 2008. They had agreed that the wife would independently withdraw maintenance funds for their children and herself from an account endowed with 306,832 Fr., which was praised by her husband. The dispute was whether these were taxable maintenance contributions according to Art. 23 lit. f DBG or tax-free capital according to Art. 24 lit. e DBG. The lower courts noted that the wife had no own sources of income and therefore it should be assumed that the amount in the account belonged to the acquisitions or the personal property of her husband. Thus, it would not belong to her, even though she held a power of attorney for the account.

However, if she could prove according to Art. 200 ZGB that the funds belonged to her, the amounts withdrawn from the account would represent tax-free capital withdrawals. On the other hand, the husband expressed his will to dedicate these funds for the maintenance of his wife and children. Through this disposal of assets, a one-time capital payment for maintenance purposes in the sense of Art. 163 ZGB had been made.

The Federal Court upheld the appeal, but left open the question of whether the capital benefit in 2008 was taxable under cantonal law or not. It referred the case back to the lower court for reassessment.

‍Private tax return made easy - with Taxea.ch

‍You can easily have your private tax return prepared using our tax app taxea. Learn more about taxea here www.taxea.ch