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TAXES

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.

Rows of apartments against a blue sky in the Swiss city of Lausanne. Photo by Seraina on Unsplash
Rows of apartments against a blue sky in the Swiss city of Lausanne. Photo by Seraina on Unsplash

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. 

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PROPERTY

Checklist: What documents do I need for an apartment in Switzerland?

Looking for a flat? You need to have your documents in order. Here’s what you need to know.

Checklist: What documents do I need for an apartment in Switzerland?

Finding a flat in Switzerland is incredibly competitive, even if you are not looking in the larger metropolises of Zurich and Geneva. 

Landlords will often get hundreds of applications for each flat offer. 

One way to get ahead is to make sure you have your documents in order early – in many cases even before you see the apartment in question. 

While this will sometimes lead to some unnecessary printing, you will ensure your completed documentation is on top of the landlord’s pile when the big decision has to be made. 

If you aren’t handing the documents in in person, put them all together in one PDF file when you send it over to make it easier for the landlord to read. 

Here are some of the important documents you will need to find a flat in Switzerland. 

Overview

There are two broad categories of documents you need to move into a flat in Switzerland: the need to haves and the nice to haves, although things are so competitive these days that many of the nice to haves are getting a little more essential. 

The need to haves include identification, application form and residence permit (if you don’t have a Swiss passport). 

The nice to haves are a cover letter, freedom from debt statement, employment information, references from employers and from previous landlords and additional information about the nature of your employment, i.e. a contract showing the duration of your employment. 

All of the documents should be provided in the language of the canton in which you apply. Often it will be no problem to apply in English, particularly in larger cities, however an application in the local language will always be looked upon positively. 

Finally, while the following is a guide as to the commonly requested and required documents in Switzerland, it does vary from place to place. 

Sometimes you will need to register with a particular property company, for instance, or provide other specifics related to the accommodation, i.e. student accommodation. 

Landlords are however restricted from asking certain questions, including those related to health. More info on this is available below. 

Renting in Switzerland: The questions your landlord can and cannot ask you

Identification

This one is relatively self-explanatory, as not even the most trusting landlord is likely to allow you to move in without proof of who you are. 

For foreigners, a passport is likely to be required, although your Swiss identity card will also suffice. 

Application form

The application form is the centrepiece of your request, so be sure to include it. 

It will guide you through the process, showing you which information you need to provide and generally what the landlord considers necessary. 

Generally speaking application forms will be available online, or at the very least will be available at the apartment viewing. 

If you can, fill it out online and hand it in at the viewing – it will put you ahead of the competition. 

Employment status 

Generally, your application will ask for your profession and for your employer. 

They will also ask for a salary estimate and sometimes proof of salary, or at least a ballpark figure of what you earn. 

Real estate agencies tend to run by the loose rule that your rent should not be more than a third of your wage, so keep that in mind when applying. 

Residence permit

As we outlined here, landlords cannot as you about your nationality or other potentially associated characteristics such as religion or race, but they are permitted to ask for proof of your residency status. 

Specifically, a landlord is allowed to ask whether you are Swiss or not and to provide details of your citizenship or residency details, i.e. which type of permit you have to live in Switzerland. 

Again, while this may appear to be a personal question and may result in discrimination, landlords will want to know you have a right to live in Switzerland and are therefore likely to stick around for the long(ish) term. 

Freedom from debt statement 

There are two statements here – a general certificate saying you are not in debt (from organisations like CRIF, ZEK, IKO or Bisnode) and one which highlights you are not in debt to your previous landlord. 

Generally speaking, neither of these are required in Switzerland, although you will be making your life more difficult if you don’t provide them. 

In Germany and Austria, landlords will often ask for a Mietschuldenfreiheitsbescheinigung (pronounced meat-shool-den-fry-height-bee-shine-ee-goong). 

Switzerland loves paperwork. Photo: Christa Dodoo on Unsplash.

Switzerland loves paperwork. Photo: Christa Dodoo on Unsplash.

Literally translating as rent-debt-freedom-certificate, the Mietschuldenfreiheitsbescheinigung is a document which confirms you are not in rental debt for your previous properties. 

Keep in mind that in Switzerland the previous landlord is under no obligation to provide this certificate – and a tenant is also under no obligation to show it. 

Tenant or landlord: Who pays which costs in Switzerland?

However, as with everything in this list, such a certificate is likely to help convince a landlord that a tenant is trustworthy. 

A landlord looking at two identical applications is likely to decide in favour of the tenant who has provided a Mietschuldenfreiheitsbescheinigung rather than the tenant who hasn’t. 

If your landlord will not provide you with one – or asks for a large sum of money to get it – you can provide this information to your prospective landlord. 

Generally speaking you should not be charged more than 20 francs for such a statement. 

Cover letter

A cover letter will usually not be a requirement, however it is perhaps the best chance you have to explain a little about yourself, why you want to live in the region (and in the specific flat) and what your long-term goals are. 

Generally speaking you will not get to meet the landlord personally (unless its a private rental), so the cover letter is your best chance to give an indication as to who you really are. 

When writing a cover letter, be sure not to simply repeat the information on your application form – use it to tell a story about yourself and why you are captivated by the flat (remember that landlords will be able to smell a generic cover letter a mile away). 

Like resumes, cover letters in Switzerland generally include photos. 

Recommendation letters

Recommend letter of recommendation from your former landlord or from your employer are definitely in the nice to have category and may not be looked at at all, however a landlord may be swayed by the positive opinion of a previous landlord. 

Renting in Switzerland: Can a landlord ask if I am vaccinated? 

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