Purchase, ownership, sale

Home ownership: your tax liability

What taxes are due when you own a home in Switzerland? The following taxes are payable when buying, owning or selling property held as private assets.

by UBS Insights 13 May 2024 6 min read

Content:

What taxes and fees are payable when you buy a property?

If you add together all the taxes and ancillary costs, buying real estate could cost tens of thousands of francs in extreme cases.

In most cantons, a change of ownership means liability for property transfer tax. As a rule of thumb, this will be between 1 and 3 percent of the purchase price. In some cases the buyer pays this tax, in others it is split between the buyer and seller, depending on the canton. The federal government and cantons such as Zurich or Schwyz do not levy a property transfer tax.

Notarial and land registry fees also vary considerably. Although these are not taxes in the traditional sense, they can still be significant. Let’s take a look at the notarization of a purchase contract for an apartment costing CHF 700,000 as an example. In many cantons, such as Zurich, Schwyz or Thurgau, a fee of several hundred francs is charged. In Bern, Ticino or some cantons of French-speaking Switzerland, however, notarization often costs CHF 2,500 to 3,500; in extreme cases, it can cost up to six times as much.

The same applies to the cost of drafting the Schuldbrief (Swiss mortgage certificate) that you will need to secure a mortgage. Issuing a Schuldbrief worth CHF 500,000 costs CHF 750 in the canton of Schwyz, including VAT. However, in the canton of Bern, a notary will charge roughly CHF 1,300 excluding VAT, in line with the cantonal table of fees.

Remember you may also be liable for taxes on capital withdrawals, which would apply if you use retirement savings (pension fund or pillar 3a) to finance the purchase. For example, taxes of roughly 4 to 10 percent would apply if you withdraw CHF 250,000.

How much will my mortgage cost?

With the mortgage calculator, you can easily and quickly find out whether you can afford your dream property.

Am I liable to pay tax when I sell my home?

In most cases, the proceeds from the sale of a property are higher than its purchase price. All cantons levy a property gains tax on this difference. Here too, the amounts vary considerably between cantons. It depends on the length of ownership – the greater the profit and the shorter the duration of the ownership, the higher the tax. You can deduct all value-enhancing investments during the period of ownership, as well as transfer costs, brokerage or notary fees. As the tax payer, you should keep all receipts of ancillary costs and investments in a safe place, as you will need to provide proof.

We recommend you always clarify fees, tax implications and any tax relief in advance. In the case of residential property, property gains tax can be deferred in all cantons if the seller becomes a homeowner again within a reasonable period of time (usually two years). To defer all of the tax, the entire proceeds of the sale must be invested in the new property. There is no possibility of deferral for rented properties held as private assets.

To ensure that taxation remains reasonably moderate, you should seek advice and take a closer look at the tax consequences of owning your own home.

What taxes are due when you own a home?

According to current rules, owners must pay tax on the imputed rental value as income. The Federal Supreme Court stipulates that this value must be at least 60 percent of the market rent. Owners are also liable for wealth tax. Some cantons also levy a separate real estate tax of between 0.1 and 3 per thousand of the taxable value of the property.

How is the value of my home calculated for tax purposes?

The tax value of a home is determined by the cantonal tax authorities. However, the exact procedure may vary depending on the canton and municipality.

As a rule, the valuation is carried out on the basis of the real estate assets, which includes the value of the land and the value of the building on it. The exact calculation can take into account various factors, such as the size of the plot and the type of use (e.g., residential, commercial or agricultural).

It is always advisable to contact the tax authorities for specific information on how they calculate the value of your home for tax purposes.

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Cantonal differences regarding real estate taxation

The taxation of real estate varies considerably between cantons. Even the different ways in which the tax value is determined mean that different wealth taxes are due.

There are also major differences in property gains tax. This tax depends on the increase in value in the period between the purchase and sale of the property.

Tax rates also differ depending on the canton.

Even this brief summary shows that owners should obtain information from the tax authorities of their canton or consult a tax advisor.

Tax deductions

Owners can however claim some deductions when filling out their tax return:

  • You can deduct mortgage interest in full from your taxable income, but not more than CHF 50,000 more than a taxpayer’s gross investment income.
  • If you choose the indirect amortization, you can reduce your taxable income by paying into a pillar 3a account up to the maximum amount.
  • All expenses connected with maintenance and preservation of value (e.g., repairs, painting, maintenance work in or around the house) are deductible, as well as
  • all ongoing ancillary costs and insurance premiums related to the property.

Value-enhancing expenses are not deductible – with one important exception: Investments to save energy, such as new energy-saving windows or conversion to a heat pump with a geothermal probe, are generally fully deductible from taxable income. To do this, consult the guidelines and information sheets of your canton.

Conclusion

The tax treatment of a privately owned property is complex. Homeowners should therefore look into their tax position in good time when it comes to buying, owning or selling their property.

Tax liabilities arise when buying and when selling. These can vary between cantons, for example, property transfer tax or taxation of the profit achieved when the property is sold. The choice of financing options can also have tax implications.

Owners should regularly check whether the tax rules in their canton have changed and retain contractors’ documents and receipts for tax audits.
You should always seek advice from tax experts to ensure that you benefit from current tax regulations and can take advantage of possible tax breaks.

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Disclaimer

This publication is for personal information purposes only within Switzerland and is not to be understood as a recommendation, offer or solicitation of an offer for investment or other specific products and services. It is not intended to form investment, legal or tax advice and should not be used as the basis for financial decisions. Before making a decision, you should obtain professional advice.
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