Property: Why you can be taxed four times over for owning a home in Switzerland
High property taxes are one of the major reasons renting remains so popular in Switzerland. Here’s what you need to know.
Switzerland is the only country in Europe where more than half of the population rents rather than owns their home.
EXPLAINED: Why do so many Swiss rent rather than own their home?
While the reasons for this are extensive - from strong tenancy rights to a high proportion of short-to-medium-term residents - a major factor is the excessive taxes property owners have to pay in Switzerland.
If you own a house or apartment in Switzerland, you can be taxed four times over on the same property.
While property taxes are common around the globe, including in countries with high home ownership rates, Switzerland levies a variety of property taxes which can accumulate to make renting seem more desirable.
The following is an overview of the taxes you may pay on your property in Switzerland.
What taxes do I pay on my property in Switzerland?
In Switzerland, you are liable for four different taxes on a property.
These are: rental value tax, cantonal property tax, capital tax and capital gains tax.
Some of these are charged at a cantonal level, which means they may differ from canton to canton.
Rental value tax
If you own a property in Switzerland you are liable for the rental value tax - even if you live in it.
Under Swiss law, owner-occupiers effectively “rent” their home to themselves.
As there is no actual rent, this is charged on a rate of roughly 60 to 70 percent of what the notional rental value of the home would be if it was leased on the open market.
You can deduct this amount - and maintenance costs on the property - in your annual tax return.
Note that you are liable to pay the imputed rental value tax on all properties you own, including second homes and holiday homes.
Cantonal property tax
At a cantonal level, you are liable to pay an annual property tax on the value of the house or apartment.
This usually amounts to less than one percent of the property’s value per year. The ‘value’ is the total market value of the property, regardless of mortgages or other debts.
EXPLAINED: How where you live in Switzerland impacts how much income tax you pay
Around half of Switzerland’s cantons charge this tax, with Zurich, Zug and Basel Country being some notable exceptions.
This tax is most common in areas where second home ownership is common, i.e. tourist areas and winter sports locations.
Although you will include both homes in the one tax return, the effective tax rate is based on the location of each home, rather than where you reside.
Capital tax
The next tax you may be liable for in Switzerland is the annual capital tax, which is part of a broader wealth tax on all assets held in Switzerland or abroad.
As with the cantonal property tax, this is generally less than one percent of the value of the property (more commonly less than half a percent).
Unlike the cantonal property tax, the ‘value’ of the property also includes debts such as mortgages, meaning that the amount you pay is likely to be lower than the market value of the property.
EXPLAINED: The hidden costs of renting in Switzerland
Capital gains tax
Sometimes known as property gains tax, this is a tax on profit you may have made from selling your home.
This can be a significant outlay, with property gains tax as high as 40 percent in some cantons (i.e. Zurich), although it is lower in more rural cantons (i.e. as low as 15 percent).
Over time, the amount you need to pay decreases. The reason for this, as outlined by the Swiss government, is to reduce property speculation.
“How much of the profit you have to pay in tax therefore depends in most cantons on how long you owned the house: the longer you have owned the property, the lower the property gains tax is.
Reader question: Does buying a home make financial sense in Switzerland?
On the other hand, the cantons tax gains on real estate achieved over a short period of ownership more heavily; this reduces the incentive to engage in property speculation.”
Generally speaking, the long-term discount is measured more in years than in months, meaning you will have to own your property for some time before you see the capital gains tax fall significantly.
More information can be found on the official Swiss government site here.
Please note: This report has been written as a guide only and does not constitute legal advice. Please contact a tax and/or property broker for specifics surrounding property taxes in Switzerland.
Comments
See Also
Switzerland is the only country in Europe where more than half of the population rents rather than owns their home.
EXPLAINED: Why do so many Swiss rent rather than own their home?
While the reasons for this are extensive - from strong tenancy rights to a high proportion of short-to-medium-term residents - a major factor is the excessive taxes property owners have to pay in Switzerland.
If you own a house or apartment in Switzerland, you can be taxed four times over on the same property.
While property taxes are common around the globe, including in countries with high home ownership rates, Switzerland levies a variety of property taxes which can accumulate to make renting seem more desirable.
The following is an overview of the taxes you may pay on your property in Switzerland.
What taxes do I pay on my property in Switzerland?
In Switzerland, you are liable for four different taxes on a property.
These are: rental value tax, cantonal property tax, capital tax and capital gains tax.
Some of these are charged at a cantonal level, which means they may differ from canton to canton.
Rental value tax
If you own a property in Switzerland you are liable for the rental value tax - even if you live in it.
Under Swiss law, owner-occupiers effectively “rent” their home to themselves.
As there is no actual rent, this is charged on a rate of roughly 60 to 70 percent of what the notional rental value of the home would be if it was leased on the open market.
You can deduct this amount - and maintenance costs on the property - in your annual tax return.
Note that you are liable to pay the imputed rental value tax on all properties you own, including second homes and holiday homes.
Cantonal property tax
At a cantonal level, you are liable to pay an annual property tax on the value of the house or apartment.
This usually amounts to less than one percent of the property’s value per year. The ‘value’ is the total market value of the property, regardless of mortgages or other debts.
EXPLAINED: How where you live in Switzerland impacts how much income tax you pay
Around half of Switzerland’s cantons charge this tax, with Zurich, Zug and Basel Country being some notable exceptions.
This tax is most common in areas where second home ownership is common, i.e. tourist areas and winter sports locations.
Although you will include both homes in the one tax return, the effective tax rate is based on the location of each home, rather than where you reside.
Capital tax
The next tax you may be liable for in Switzerland is the annual capital tax, which is part of a broader wealth tax on all assets held in Switzerland or abroad.
As with the cantonal property tax, this is generally less than one percent of the value of the property (more commonly less than half a percent).
Unlike the cantonal property tax, the ‘value’ of the property also includes debts such as mortgages, meaning that the amount you pay is likely to be lower than the market value of the property.
EXPLAINED: The hidden costs of renting in Switzerland
Capital gains tax
Sometimes known as property gains tax, this is a tax on profit you may have made from selling your home.
This can be a significant outlay, with property gains tax as high as 40 percent in some cantons (i.e. Zurich), although it is lower in more rural cantons (i.e. as low as 15 percent).
Over time, the amount you need to pay decreases. The reason for this, as outlined by the Swiss government, is to reduce property speculation.
“How much of the profit you have to pay in tax therefore depends in most cantons on how long you owned the house: the longer you have owned the property, the lower the property gains tax is.
Reader question: Does buying a home make financial sense in Switzerland?
On the other hand, the cantons tax gains on real estate achieved over a short period of ownership more heavily; this reduces the incentive to engage in property speculation.”
Generally speaking, the long-term discount is measured more in years than in months, meaning you will have to own your property for some time before you see the capital gains tax fall significantly.
More information can be found on the official Swiss government site here.
Please note: This report has been written as a guide only and does not constitute legal advice. Please contact a tax and/or property broker for specifics surrounding property taxes in Switzerland.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.