Do works of art in a Swiss estate count as household effects or as an asset?
What are the tax consequences?
An art collection may qualify as tax-exempt household goods or taxable investment / asset in Switzerland.
Critieria
The decisive factors may be the ratio of the value of the art objects to the total assets, the type of insurance (household contents or art insurance), the actual use and the purpose (residential purpose or capital investment). Is a work intended to complement a collection or to furnish the home? Does a painting belong to the normal, customary furnishings of an apartment and thus to the household effects? Is it for personal use? Or does it count as a taxable asset?
The practice in the cantons varies.
Canton of Zurich, Giacometti ruling, after-tax
In the canton of Zurich, the so-called Giacometti ruling was rendered in 2012, according to which even a single item (with a value of CHF 150,000 or more) can be considered a taxable asset. The value was based on the insurance value. It was not decisive to consider inheritance as a motive for acquisition:
A inherited a painting from her father in 1984. She allegedly hung it up in the kitchen. In 1993-1996, A insured the work of art for CHF 150,000, but the painting was not declared in the tax returns for the tax periods 2002-2007. In 2008, A sold the painting for CHF 2 million, whereupon the cantonal tax office imposed a supplementary tax on her (cf. Ruling of the Administrative Court of Zurich dated May 9, 2012, SR.2011.00019).
In case of doubt, the economic circumstances of the taxpayer may be decisive: Can a customary value be assumed for the art object or does it go beyond the scope and exceed it?
Especially with works of art, the question of value and the valuation methods arise. The current market value is only determined after a sale.
What should be documented when collecting art?
Leaving behind an art collection, it is preferable to provide for documentation (artist, title, proof of purchase, appraisal, proof of authenticity, provenance, state of preservation, location, etc.).