Taxes for Homeowners in Switzerland Explained

Most people already understand that owning a property or building will impact their wealth tax, and the income from rents is taxable. But there are many other points to pay attention to, such as imputed rental income, property taxes, and taxes that apply when you buy and sell a property.

Important: The information in this article is directed exclusively to private individuals. The rules for real estate that is owned by other entities, such as corporations and other limited liability companies, are different from those for private individuals.

Income taxes and real estate

If you live in a property you own, you have to declare the imputed rental income in your tax returns along with your other income. The imputed rental income is equal to approximately 60 to 70 percent of the rent that would typically be paid for an equivalent property. The imputed rental income raises your taxable income, and subsequently your income tax bills as well.

If you rent out a property you own, you have to declare the rent your collect as income and pay income tax on it.

There are many possible tax deductions that you can use to reduce your taxable income, and therefore the taxes you have to pay.

The list below shows you some of the common tax deductions. Consider asking the tax administration of the canton in which the property is located to provide you with detailed information about the exact deductions for real estate that apply in that canton.

• Interest paid on mortgages: If you have a mortgage, you can deduct the interest you paid for the mortgage from your taxable income.
• Running expenses: Many running expenses are tax deductible. Examples include:
  • Premiums paid for property insurance and property liability insurance. 
  • Rates paid for road maintenance, street lighting, and street cleaning.
  • Payments into a repair fund or renovation fund, for condominiums.
• Investments you make in order to maintain the value of the property are tax deductible. Investments that increase the property’s value, on the other hand, are not normally tax deductible. However, there are some exceptions for value-increasing investments related to energy-saving environmental protection.

Cantonal tax authorities each have their own clear ideas about which tax deductions are acceptable and which are not. The canton of Zurich, for example, has published a notice that clearly lists unacceptable tax deductions. This list includes things like rates paid by property owners for roads, sidewalks, canalisation, district planning, and measuring services.

Wealth taxes and real estate

The value of houses, apartments, and other properties that you own counts towards your taxable wealth. The Swiss federal government does not levy wealth taxes, but all cantons and municipalities do. Wealth taxes are levied on an annual basis.

Mortgage debt can be deducted from your taxable wealth, so that you only pay taxes on your equity in the property, and not on debt.

Property taxes and real estate

There are 12 cantons in which property taxes are levied on houses, apartments, and other properties. In six of these cantons, property taxes are only levied by some municipalities. The terms used to describe property taxes varies between cantons. In every case, property taxes are levied on an annual basis.

Like wealth tax, property tax is a tax on the value of your property. But unlike wealth tax, you cannot deduct mortgage debt.

There are 13 cantons that do not have property taxes. These are Aargau, Appenzell Ausserrhoden, Basel-Landschaft, Glarus, Luzern, Nidwalden, Obwalden, Schaffhausen, Schwyz, Solothurn, Uri, Zug, and Zurich. The canton of Basel-Stadt does not have a property tax for private individuals, but does levy a property tax on properties owned by other legal entities.

The table below lists all of the cantons in which properties owned by private individuals are subject to property taxes.

Table 1: Property taxes for private individuals

* The municipalities have the right to levy a property tax, but not all municipalities impose this tax.

Three cantons have a minimum property tax

Three cantons – Nidwalden, Obwalden, and Uri – have a minimum property tax for properties owned by private individuals. In the canton of Uri, the minimum tax applies when your cantonal and municipal income, wealth, and church taxes in a tax year total less than 300 francs, and the value of your property is 50,000 francs or more. In Obwalden and Nidwalden, the minimum property tax is applied if it is higher than the taxes you would pay in the canton under standard taxation.

Which taxes apply when I buy a property?

There are 18 cantons that charge a property transfer tax when a property in their jurisdiction changes ownership. In most of these cantons, this tax falls entirely on the buyer. In the cantons of Basel-Landschaft and Obwalden, the tax is divided between the buyer and the seller. In some canons, the buyer and seller can decide together about which of them will cover the tax.

The table below gives you a general overview of the tax rates. But it is important to note that there are big differences between cantons with regards to the way that property transfer taxes are applied. In some cases – such as when a property is inherited, or purchased from you by your spouse or child – the property transfer tax does not apply at all.

Table 2: Property transfer taxes by canton

The cantons of Aargau, Glarus, Uri, Schaffhausen, Schwyz, Tessin, Zug, and Zurich charge a property transfer fee instead of a property transfer tax. For properties in the canton of Zurich, the fee is equal to 0.2 percent of the transacted amount.

Which taxes apply when I sell a property?

When you sell an apartment, house, or other property, the sale is subject to a property capital gains tax. This tax is levied on the difference between the price you paid for the property (including value-increasing investments), and the price you sell it for. In many cantons, the tax rate varies depending on how long you owned the property before selling, with lower rates applying if you owned the property for a long time.

There are big differences between cantons with regards to both the size of property capital gains taxes, and the methods used to calculate them.

• Zurich: The canton of Zurich uses a progressive tax system with a broad scale of different tax rates. The first 4000 francs of capital gains are taxed at a rate of 10 percent, while the portion that exceeds 100,000 francs are taxed at a rate of 40 percent. The tax rate is raised by 50 percent if you owned the property for less than one year, and by 25 percent if you owned it for between one and two years. The tax rate is discounted by between 5 percent (if you owned the property for between five and six years) and 50 percent (if you owned the property for more than 20 years).
• Basel-Stadt: Capital gains on the sale of a property used exclusively as your place of residence and owned by you for less than five years are taxed at the rate of 30 percent, regardless of the size of the capital gain. The rate is reduced by 0.9 percentage points for each additional, consecutive year of ownership. If you owned the property for more than 25 years, the property capital gains tax rate is 12 percent. The tax rate for capital gains on the sale of a property that you did not live in yourself can be as high as 60 percent.

In many Swiss cantons, the property capital gains tax is only levied if the capital gain exceeds a certain threshold. This threshold ranges between 2200 and 13,000 francs, depending on the canton. In some cantons, the entire capital gain is taxed. Under certain circumstances, the capital gains tax may be deferred. A tax deferral is particularly likely when a property is sold by one spouse to their partner, or by a parent to a child. It is also likely when the property was your primary residence, and you have bought another property that will replace it as your new residence. Important: Always take the time to get informed about the specific rules that apply in your case.

Inheritance taxes and real estate

If a property is included in an inheritance, then a portion of the full inheritance will be taxable in the canton where the property is located. In some cases, it can make financial sense to sell the property before your death if the property is in a canton with high inheritance taxes. Consider consulting a tax advisor that specialised in Swiss inheritance taxes.

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