At a meeting late on June 14, parliament voted in favour of a plan to scrap the imputed rental value tax in Switzerland. The government has been trying to get rid of the controversial housing tax since the 2000s, but the proposal only now has enough votes to proceed.
By 158 votes to 31, the National Council voted in favour of a plan which will radically change how taxes are collected on people who have bought property in Switzerland. Chief among the changes will be scrapping imputed rental value (Eigenmietwert) - a tax seen by many as the biggest barrier to homeownership.
Currently, anyone who has bought a house in Switzerland has to pay a tax based on how much they could theoretically earn were they to rent out their home. How this calculation is made varies by canton, but typically uses land value and the property's price - calculated by factors like size, location, age and the quality of utilities. Once mortgage and maintenance costs are deducted, this theoretical annual rental income is added to the income from your salary and taxed as such.
For example, if your annual salary is 80.000 Swiss francs and you own property which has an imputed rental value of 42.000 Swiss francs a year, if you have no mortgage or maintenance costs to deduct, 122.000 Swiss francs would be your "income" on your tax return for the year and you will be taxed at that rate by federal and cantonal authorities. This means that tax bills can be increased by thousands of Swiss francs a year, on top of the cost of the house.
According to Comparis, after being first implemented in the Second World War to pay for home defence, lawmakers justified the policy by arguing that imputed rental value is a “solidarity-based tax”, balancing the financial burden between those who don’t pay rent and those who do.
However, with the housing crisis in full swing, opponents argue that the tax makes it even harder to afford property in the long term and encourages people to hold debt through mortgages. Today, only 36 percent of people in Switzerland own their own homes.
Attempts to get rid of imputed rental value tax began in the 2000s, but up until this point have failed to gain enough support in parliament or at referendum. Now, after the plan was agreed upon in principle back in August 2022, a “watered-down” version has now been passed.
Under the plans, reported by RTS, imputed rental value tax will be eliminated entirely on first and second homes. However, to make sure the law passed plans to keep mortgage and maintenance costs fully tax deductible have been shelved.
Instead, maintenance costs would no longer be tax deductible, while only part of mortgage interest payments could be removed from tax bills. While still up for debate, RTS estimated that only 40 to 70 percent of mortgage repayments will be deductible.
While not over the line just yet, the approved law is the closest the country has ever been to eliminating the tax entirely. The proposal will now return to the Council of States for further scrutiny, with further votes and possibly a referendum on the horizon should opposition arise.