Own rental value – what next?

Swiss voters have decided by a margin of 57.7% that own rental value should no longer be taxed in future. In its place, the cantons may levy a special second property tax. Which cantons will introduce this tax and how it will be assessed in concrete terms remains to be seen. The cantons must create the appropriate legal basis for this.

However, the Federal Council wants to allow some time for the changeover; it is not expected to take place until 2028 at the earliest. This deadline is intended to allow the cantons to introduce the aforementioned second property tax.

For more information on the referendum decision, watch the SRF news video featuring Georg Halter with Brigitte Häberli-Koller, Member of the Council of States and representative of the HEV, and Ursula UZybach, Member of the National Council and President of Casafair Switzerland.

According to a blog post by ZKB, this system change will affect “not only owners of owner-occupied or rented properties, but also taxpayers who have debts but do not own any real estate.” This is because, under the new system, income tax deductions for debt interest (private loans, small loans, etc.) will generally no longer be possible. The bank goes on to write: “After implementation, the taxation of the imputed rental value will be abolished for all owner-occupied properties. In return, the maintenance and debt interest deductions associated with these properties will also be eliminated.

Exceptions for first-time buyers

To make it a little easier to buy your own home, an exception applies: for up to ten years after purchase, debt interest of up to CHF 10,000 (married couples) and CHF 5,000 (single persons) can be deducted. The deduction decreases linearly by ten per cent per annum over ten years.” The ZKB’s statements apply exclusively to income tax for natural persons and the special property tax, provided that this is actually introduced by the cantons.

Tax returns become simpler and the tax burden is reduced

According to ZKB, the changes are intended to simplify filling in tax forms for owners of owner-occupied properties and reduce the tax burden in the current interest rate environment. The bank also recommends keeping good records of value-adding costs with regard to any property gains tax, as these will no longer be deductible from income tax in future. At the same time, the bank suggests considering whether any renovations or maintenance work should be brought forward; in the case of condominiums, a temporary increase in contributions to the renovation fund could be worth considering.

System change also for investment properties

The system change also affects owners of investment properties. ZKB writes: “You will also feel the direct effects on your future tax burden. Interest on debt can now only be claimed to the extent of the ratio of the immovable assets of the rented properties to the total assets (quota-restrictive method). The limited debt interest deduction will increase the tax burden on owners of investment properties, as part of the debt interest will now be lost.”

What still needs to be clarified

According to the ZKB, it is still unclear which cantons will levy a special property tax on second homes and how the tax assessment might look in concrete terms. It is also unclear whether individual cantons will take advantage of the option to continue allowing deductions for energy-saving and environmental protection measures until 2050.

The ZKB has summarised all the important changes to the taxation of residential property in a fact sheet on the rental value of owner-occupied property, which you can download here as a PDF. VZ VermögensZentrum has also published an article on the effects of the system change. You can order a fact sheet with detailed information free of charge here.