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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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LIVING IN SWITZERLAND

Meals, commuting and ‘home office’: What can you claim on tax in Zurich?

Working from home has been mandatory in Zurich for much of the past tax year. What can you claim on tax - and what costs do you have to bear yourself?

Meals, commuting and 'home office': What can you claim on tax in Zurich?

On Thursday, February 17th, the Swiss government rolled back the working from home recommendation, meaning that working from home was purely up to employers for the first time since the start of the pandemic. 

Technological advances and the enduring legacy of the pandemic will see working from home – known in German as ‘Home Office’ – become more common in several industries in the coming years, which has clear tax implications. 

These can be relatively complex, particularly as many of the tax rules are in place at a cantonal level. 

Here’s an overview of what you can claim in Zurich – and what you cannot – when it comes to working from home. 

For a general guide on tax rules in Switzerland when it comes to working from home, check out the following link.

Reader question: Can I deduct working-from-home costs from my Swiss taxes?

Don’t live in Zurich – or want to know what costs other than working from home you can deduct? Check out the following extensive guide. 

EXPLAINED: What can I deduct from my tax bill in Switzerland?

What tax deductions can I have working from home in Zurich? 

Along with Zug, Geneva and Basel (both City and Country), Zurich allows residents to claim professional expenses as they would in a normal year, i.e. despite the Covid pandemic.

This means that you can claim meal costs and transport to work, even if you worked from home during this time. 

You can claim up to CHF15 per day, or 3,200 francs per year in Zurich. 

If you employer offers subsidised meals, you can claim a maximum of CHF7.50 per day (or CHF1,600)

Regarding transport costs, you can deduct up to CHF3,000 per year for your commute. 

This includes public transport, bicycles and mopeds. 

If you travel by private car, you can only deduct this if it is difficult to take public transport.

This is deemed to be the case if both your home and workplace are more than a kilometre from the nearest public transport stop, or if more than one hour is saved by travelling by car (per day). 

If you are unable to travel by public transport due to an injury, then you are permitted to deduct your car expenses. 

What about rent, electricity and other working-from-home expenses? 

While several Swiss cantons allow you to claim expenses of working from home like rent, electricity etc, Zurich authorities have expressly ruled this out. 

As the above costs (transport and meal allowances) have been kept in place, this is seen as a form of compromise. 

Taxpayers in Zurich are also able to claim the flat-rate deduction for all professional costs associated with working from home that are not covered by the employer, although this is only in relatively narrow scenarios. 

“This solution is advantageous for most taxpayers” say Zurich cantonal authorities. 

As with all our tax reports, this is intended as a guide only and should not take the place of qualified tax advice. More Zurich-specific information is available at this link. 

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