Changes to Swiss tax law may potentially result in financial losses for owners of second homes.
Understanding the Shift in Swiss Real Estate Taxation
Get the lowdown on the rental value tax, a term you might run across in the latest Swiss legislative happenings. Essentially, this tax equates to the potential rental income a property owner could obtain if they rented out their property, an amount assessed by tax authorities in each canton.
What's the Scoop?
In a recent parliamentary decision, both the National Council and the Council of States agreed to abolish the rental value tax for primary and secondary residences. However, this move could result in significant revenue losses for tourist cantons where many second homes are situated.
To counteract this, the National Council's Economic Affairs and Fees Committee has suggested maintaining a higher rental value tax for second homes. This proposal has received approval from the Council of States, assuring the parliamentary majority's support.
Under this new system, the abolition of the rental value tax and the implementation of the higher rental value tax for second homes will coincide. Nevertheless, individual cantons will have the power to decide whether to impose this tax and how much, providing them with flexibility in their decisions.
So, What Counts as a 'Second Home' in Switzerland?
The classification of a property as a second home, according to Swiss regulations, depends largely on its usage. There are two categories of second homes in Switzerland: second homes and second places of residence.
A second place of residence is a dwelling where an individual lives while working or studying in the country but is not their primary residence. Cross-border workers, for instance, often have a second place of residence near their workplace in Switzerland.
In contrast, a second home, as defined by law, is a second residence that is not used for work or study purposes. The Swiss government describes a second home as, "a house or apartment that is neither used by a resident of the concerned commune nor used for work or education purposes. Second homes are typically used for holidays or rented to private tenants."
When Can We Expect the New Tax Rule for Second Homes?
Fortunately for second-home owners, implementation of the new tax rule might take some time. Both projects still need to pass the final vote, which requires a change in the Constitution, necessitating a mandatory referendum for voter approval. So, second-home owners still have some time to prepare.
- Despite the impending abolition of the rental value tax for primary and secondary residences, a higher rental value tax could still apply for second homes, due to a recent agreement between the National Council and the Council of States.
- In the new system, individual cantons have the authority to decide whether to impose the higher rental value tax for second homes and determine the amount, providing them with flexibility in taxation for real-estate investments.
- According to Swiss regulations, a second home is considered a second residence not used for work or study purposes, while a second place of residence is a dwelling where an individual lives while working or studying in Switzerland but it is not their primary residence.
- Implementation of the new tax rule for second homes may take some time, as the required changes to the Constitution will necessitate a mandatory referendum for voter approval, providing second-home owners with a potential opportunity to prepare for the changes in the taxation of their investments.
