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Works of art – capital investments or household goods?

Tax authorities in most cantons recognise that artworks are fraught with a large degree of uncertainty.
Household goods and personal effects are not subject to the wealth tax. This is not the case for works of art. However, the question of precisely where to draw this line can present a major challenge.

Under current tax legislation, household effects and personal effects are not subject to the wealth tax. In other words, it is not necessary to declare them in your tax return. However, it is often difficult to decide whether certain works should be valued as household goods or works of art.

In 2012, a decision by the Zurich Administrative Court created fresh legal uncertainty here. In a judgment, it reclassified a picture of Giovanni Giacometti, which had been inherited within a family, as an asset rather than part of the owners’ household effects. The tax authority levied, among other things, supplementary wealth tax for the period in which the picture had been displayed on a wall in the household.

The court ruled that the usual furnishings of a residence with a market value exceeding CHF 150,000 constitute taxable assets, regardless of their specific usage and the financial circumstances of the taxpayer.

There are major differences between the cantons when it comes to the tax treatment of artworks. In the Canton of Geneva, art and scientific collections are expressly exempt from the wealth tax, unless they are used as objects of speculation. With regard to inheritance tax, most cantons exempt household effects – except for the Canton of Zurich.

There is also uncertainty when it comes to estimating the value of artworks. The object’s insured value is often used as a yardstick by the tax authorities. However, the insured value often exceeds the market value, since the former reflects the replacement cost. Art experts assume that the market value of many works of art is significantly below their insured value. The taxpayer could therefore commission an expert opinion proving that the market value is below the insured value. The tax authorities in the Canton of Baselland calculate a lump sum amounting to half of the insured value.

Art owners are well advised to declare their works of art, since tax authorities in most cantons recognise that artworks are fraught with a large degree of uncertainty.

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