If you are buying a house in Switzerland, it is important to know that there are additional costs levied by the government through taxes. If you are wanting to move out of renting a house or apartment and make the final step to buying a house, you must consider the additional costs involved on top of the asking price. The amount of tax and fees you must pay is based on the value of the property, your local county (canton) and your real estate agent.
Taxes and fees when buying a home in Switzerland
On top of payments towards your mortgage and home utilities, there are several fees that must be paid before and during your stay in your new home. These taxes are designed to help fund basic services in the community. These taxes apply to all types of housing in Switzerland and will be a deciding factor as to whether you can afford to buy your dream home.
Estate agents’ fees
For their role in finding your ideal home, real estate agencies will charge fees for finding and selling you property. These fees are in order to cover the cost of the listing and the services your real estate agent provides. The fees charged by real estate agents vary by company and value of property, but an average estimate has the fees costing around three to eight percent of the value of the house. Bear in mind that this cost may increase due to value-added taxation as part of business taxes.
Imputed Rental value tax
Rental value tax in Switzerland is the most long-lasting cost of owning a house in Switzerland and is the highest barrier to overcome in order to own a home. If you own a home in Switzerland, you will be charged income tax on the rental value of your property. In practise, the possible annual income of renting out your property to someone else will be calculated, then the annual prospective income will be taxed as normal income in your tax return.
For example, if you could charge 4.000 Swiss francs a month in rent, then 48.000 Swiss francs will be added to your income total when paying taxes. Please bear in mind that mortgage payments can be used to reduce the amount of rental value tax you pay.
A handy formula you can use is : (Prospective annual rent from your owned house - Annual mortgage payments) + Regular income = Income tax
Does property count toward the Swiss wealth tax?
In filing your Swiss tax return, property is counted as a valuable asset and is charged toward the wealth tax. The value of your property is added to all other assets and used to charge this tax. Wealth taxes in Switzerland range from 0,1 to 0,5 percent of total value of assets a year.
Property tax or land and real estate tax is a charge levied by some cantons on the value of a property. This tax is levied by the canton and is payable by the owners of all homes in their locality, including landlords. Bear in mind that the cantons of Aargau, Basel Land, Solothurn, Zug, Glarus, Schwyz and Zurich have chosen not to levy this tax. On average, this tax amounts to 0,5 percent of a properties’ taxable value a year.
Property transfer tax
Property transfer tax is a tax on the change of ownership of houses and land. This tax is determined by the price agreed to purchase the property. In most cantons, this is charged at 1,8 percent of the price of the property. The way that you are charged differs by canton. In most cantons, it is charged by either the canton itself or your local council (Gemeinde).
In the cantons of Aargau, Schaffhausen, Zug, Glarus, Uri and Zurich, property transfer tax is not charged directly but as an ownership and registration fee. This can range from a few hundred to a few thousand Swiss francs. Canton Schwyz has no property transfer tax or registration fee.
Property gains tax in Switzerland
If you decide to move out of Switzerland or change address and sell your old house, you will be charged property gains tax on any profit you make from the sale. This is charged at the cantonal and local level and is based on the overall profit you made when selling your house and how long you have owned the house.
This tax is calculated by finding the difference between what the property was worth when you purchased it to what you sold the property for, minus the total amount of renovations or building work done on the property while you owned it. This profit is then taxed based on how long you have been resident in the property for.
Owners that have lived in their homes for five years are charged 21 to 33 percent tax on the profit they made from selling. Owners who have lived in their home for 20 years and over have their taxes reduced to 5 to 15 percent of their profit.
Bear in mind that if you purchase a new home in Switzerland using the entirety of your profit made on selling your old house, this tax is not charged.
How to reduce a homeowner’s tax bill in Switzerland
When considering whether you should purchase a home in Switzerland, it is vital to minimise total costs and tax burdens. Here are some ways in which you can reduce the total tax cost of owning a house:
- Renovation work on properties can be tax-deductible to both rental value tax and property gains tax.
- Income from subletting can reduce rental value tax.
- Opting to co-own a house splits the value of the house between each owner when determining wealth tax.
- Go through the basic steps to getting a mortgage in order to find the best mortgage deal for you.