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Tax advantages when buying a property

Whether a charming house with a garden or a chic, modern freehold flat – the dream of owning a home is widespread in Switzerland. But purchasing property is more than a significant financial obligation; it has many other implications. These are particularly relevant with regard to your tax bill.

Every year in March, tax returns are due in Switzerland. Though a chore for most people, completing a tax return can also offer unimagined opportunities. Particularly for property owners, there are a number of deductions that can be used to reduce their tax bill. If you are looking for a property or have just signed a sale agreement, you should familiarise yourself with the tax consequences of buying a property.

What taxes are incurred when buying or selling a property?

From the date of notarisation, different taxes apply when buying a property: The property gains tax is calculated from the difference between the purchase price and the sale price of a property. However, it is calculated not only on the basis of profit, but also on the basis of the duration of ownership. The longer the property has been in the hands of the owner, the less property gains tax they will incur. Each canton regulates taxation differently, so it is worth checking with the relevant tax office beforehand.

Important: the property gains tax is borne by the seller alone.

Depending on the canton, property transfer tax, inheritance tax or gift tax may also be levied. These are regulated differently at the cantonal level: some taxes are levied in some cantons but not in others. In this case, too, it is worth checking with the tax office before buying or selling a property.

What changes when completing my tax return?

  1. The biggest change in the tax return is the imputed rental value: anyone who occupies a property themselves must add the imputed rental value to their taxable income. At the beginning of the purchase, the imputed rental value is estimated. It is worth taking a close look at this: check the property data carefully and object if you do not agree. This allows you to have direct influence on your tax bill. On the other hand, if you rent out your property, the rental income will be added to your taxable income at 100%.

  2. Even if the imputed rental value initially creates a disadvantage, this is offset by the many advantages. If you finance your property with a mortgage, you can fully deduct the mortgage interest from your taxes. In addition, mortgage debt provides major advantages in the case of property tax: those who have debts can deduct them from their assets and are therefore often subject to the exemption from property tax.

  3. In most cantons, condominium owners can deduct contributions to the renewal fund and the administrative costs from their taxes. In addition, expenses incurred to preserve the value of the property can also be deducted. This includes, for example, painting, plumbing or carpentry work, service plans for heat pumps or descaling units and premiums for buildings insurance. It is worth checking each year whether the actual costs exceed the lump sum. If so, you can state all the costs and submit them to the tax administration along with the relevant receipts and invoices.

The transfer of ownership of a property therefore always entails tax consequences. The cantons themselves decide what these will be, which is why it is important to be fully informed about them. Further information can be found in the Engel & Völkers Tax Guide. If you have any further questions or would like to use our experts’ intermediary services, our staff will be happy to help you.

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