Real estate taxation

Property taxes

Property taxes comprise:

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Capital gains tax

Capital gains tax (CGT) is an object-related, or separate, tax. The tax authorities of the canton in which the property is located impose a tax on profit from the sale of a property or parts thereof.

Ownership transfer

Legally, change of ownership comprises

  • the sale of a property (asset deal)
    • transfer or division of the property under private or public law
    • exchange
    • donation/gift
    • investment or takeover by a joint-stock company or cooperative
  • commercial change of ownerhip (share deal)
    • sale of the legal owner
    • similar commercial transactions.

Capital gains

Der steuerliche Grundstückgewinn besteht in der Differenz zwischen Verkaufserlös und Anlagekosten:

For taxation purposes, capital gain is defined as the difference between sales price and investment costs:

proceeds from sale
minus original purchase price
plus value-increasing investments
minus profit-associated costs as per tax law.

If ownership exceeds 20 years, profit is calculated from the statistically determined property value 20 years ago.

Tax assessment

Rates of taxation differ from canton to canton and are usually degressive, based on length of ownership.

Tax deferral

In the course of succession or for social reasons, tax liability may be deferred in cases of

  • change of ownership between spouses
  • advance inheritance, including mixed gifts, so-called, or divided inheritance
  • exchange and donation/gifts
  • land rezoning and consolidation
  • corporate restructuring
    • change of legal form
    • mergers
    • divisions
  • owner-occupied homes or condominiums (not including second homes and vacation homes) being replaced
  • similar.

Operating or real estate holding company?

As a rule, commercial changes of ownership of operating companies with business premises are tax exempt. Example: Share deal involving a company that owns and operates a hotel. The investor should determine the operating conditions precisely. For instance, if the hotel is leased to a hotel management company, a real estate holding company exists for the hotel premises – and enjoys no tax benefits. If during his period of ownership the investor sells the hotel’s operation in favor of a management company, this change of purpose might lead to retroactive taxation. The purpose of real estate holding companies is to own and manage, rather than merely operate, objects as secure and profitable capital investments.

Fiscal planning

Property taxes influence investment yield, particularly for brief periods of ownership. Investors are advised to conduct fiscal planning at the time of purchase and examine all options (operating company; if and to what extent this this advisable under cantonal tax law: accreditation as real estate dealer, etc.).

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Ownership transfer tax

The cantons tax property transfers. Not all cantons levy ownership transfer tax; the canton of Zurich, for one, abolished it January 1, 2005.

Ownership transfer

Capital gains tax rules apply in equal measure.

Tax assessment

In absence of a market value, ownership transfer tax  is based on the purchase price . Tax rates differ from canton to canton. They range from 0.5% to 3.0%.

Tax-free ownership transfers

Depending on the canton, changes of ownership may be exempt from transfer tax, in these cases:

  • change of ownership between spouses
  • advance inheritance, including mixed gifts, so-called, or divided inheritance
  • exchange and donation/gifts
  • land rezoning and consolidation
  • corporate restructuring
    • change of legal form
    • mergers
    • divisions
  • owner-occupied homes or condominiums (not including second homes and vacation homes) being replaced
  • similar.

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Real estate tax

Some cantons still apply a real estate tax based on real estate ownership or use.

Tax assesment

Tax is based on the market value. Depending on canton, the tax rate is roughly 2/1000.

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Further information:

» grundsteuern.ch (German)

Value-added tax (VAT)

In the case of commercial properties subject to value-added tax according to law or seller’s option, a change of ownership may involve taxation of supplies. It should therefore be determined whether the seller’s VAT status applies or not.

General taxes

Corporate taxes

  • federal tax on profits (8.5 % on profits after tax in the case of joint-stock companies and cooperatives)
  • cantonal and local tax on profits (tax competition between cantons and townships: cantonal and local tax rates differ from tax authority to tax authority)
  • tax on capital.

Depending on purpose, function and geographic area of activity, tax privileges are extended to companies with special tax status.

Further information:

» unternehmenssteuern.ch (German)

Taxation of natural persons

The income of natural persons is subject to income tax, and assets to a marginal wealth tax. Employers levy a tax at source on wages paid to expatriates and cross-border commuters. Under certain conditions the federal government and most cantons apply lump-sum taxation for individuals.

Further information:

» besteuerung-privatpersonen.ch (German)
» quellensteuern.ch (German)
» pauschalsteuern.ch (German)

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