Credit of expenses against the property gains tax

When a profit is made from the sale of a property, capital gains tax is due. Value-enhancing expenses such as investment costs are deductible for capital gains tax. However, it is required that the respective amount was actually paid.

Expenses are deductible from the capital gains tax, but only if they are value-enhancing. Expenses are value-enhancing if they would create additional, new values. Thus, investment costs (total costs for the acquisition of an existing property or for the construction of a new property) are deductible, but it is necessary that the expenses were actually made. On February 22, 2018, the Federal Court ruled on the case 2C_357/2017. A Zurich real estate company had acquired various properties in 2008 and planned to build on them. For this, they engaged a general contractor. After construction, the built units were sold by the real estate company at a profit. Due to the profit, a capital gains tax was due. However, the real estate company went bankrupt and drove the general contractor into bankruptcy as well due to unpaid bills. The local tax authorities demanded the capital gains tax. The bankruptcy creditors of the real estate company resisted, demanding that the unpaid bills be deducted as investment costs from the capital gains tax. Since they were dismissed by all previous instances, they took the case to the Federal Court. Yet also Lausanne denied their request. Unpaid costs of third parties are not deductible from the capital gains tax. Only expenses that were actually paid can be deducted. If an expense has been invoiced but ultimately not paid, the expense in question has effectively not occurred. Whether these capital costs were recorded in the accounting was irrelevant. The principle of congruence, the basic idea of which is that capital gains tax only captures the "undeserved" value increase on a property, not the added value created by investments of the seller, i.e., labor or capital, would not be violated.

Private tax declaration made easy – with Taxea.ch

‍You can easily create your private tax declaration using our tax app taxea. Learn more about taxea here www.taxea.ch

• Further Information
   
• Calculate Quote for Trust Services