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Overview

i Investment vehicles in real estate

Swiss law does not provide for special legal entities for real estate investments but does provide distinct rules for real estate investment companies (see Section II.iv). Any given legal entity may function as a real estate investment company, although the majority are limited companies. Swiss law also provides for regulated investment vehicles, which contain special provisions for real estate investments (see Section III).

ii Property taxesSwiss taxation system

The Swiss taxation system differs between taxes levied at the federal level and taxes levied at the cantonal and communal levels. Income tax, stamp duty, withholding tax and value added tax (VAT) are federal taxes. The cantons and communes also levy income tax, equity tax, real estate holding tax, real estate transfer tax, real estate stamp duty and (in some cantons) a special tax on real estate capital gains.

Tax on real estate capital gains

Cantons and communes may tax capital gains realised from the sale of real estate under either the monistic or the dualistic system.

In the monistic system, all real estate capital gains are subject to a special tax. The tax is exclusive – namely, the capital gains are not subject to any further charge. As a result, capital gains on real estate are not part of the net profit of a legal entity and not subject to income tax. The tax is levied on the difference between the investment value and the sales proceeds.

An exception applies to recaptured depreciations on real estate, which are subject to income tax. Recaptured depreciations refer to the difference between the investment and the lower book values at the time of sale. The cantons Berne (BE), Basel-Landschaft (BL), Basel-City (BS), Jura (JU), Nidwalden (NW), Schwyz (SZ), Ticino (TI), Uri (UR) and Zurich (ZH) apply the monistic system.

In the dualistic system, capital gains from real estate owned by individuals are subject to a special real estate capital gains tax, whereas capital gains from real estate held by legal entities are part of the net profit and subject to income tax. In general, there is no special tax on real estate capital gains for legal entities in this system. The cantons Argovia (AG), Appenzell-Innerrhoden (AI), Appenzell-Ausserrhoden (AR), Fribourg (FR), Geneva (GE), Glarus (GL), Graubünden (GR), Lucerne (LU), Neuchâtel (NE), Obwalden (OW), Sankt Gallen (SG), Schaffhausen (SH), Solothurn (SO), Thurgau (TG), Vaud (VD), Valais (VS) and Zug (ZG) apply (in principle) the dualistic system.

The tax rate varies widely and depends on the canton and the holding period. In monistic cantons, short holding periods are subject to heavy taxation as a measure against real estate investment speculation. Tax rates may vary from zero to 60 per cent. Note that the seller is liable for the real estate capital gains tax. This requires special attention from the buyer as the tax authorities in monistic cantons (as well as in the dualistic canton of TG) have the statutory right to put a mortgage on the real estate to secure the tax payment.

Real estate holding tax

Real estate holding tax is levied in the cantons (except for AG, BL, GL, SO, SZ, ZG and ZH). There is no such tax at the federal level. The tax base is the gross value of direct real estate holdings in the competent canton. Debts are not taken into account. Real estate holding tax is levied annually and for the entire year. A pro rata calculation (e.g., for the year of sale) is not possible. Tax rates range from 0.02 to 0.3 per cent.

The tax in NE applies only to real estate held for investment purposes. Some cantons levy real estate holding tax only if it is higher than the ordinary income tax. Such provisions exist in the cantons AR, BS, LU, OW, NW, SH, TG and TI.

Real estate transfer tax

Real estate transfer tax is levied on the transfer of rights in rem (e.g., ownership of real estate) or the transfer of shares in real estate investment companies. It is a cantonal or communal tax and exists in all cantons except for the cantons AG, GL, SH, SZ, TI, UR, ZG and ZH. No real estate transfer tax is levied at the federal level. The tax is levied on the fair market value of the real estate transferred. Tax rates range from 1 to 3.3 per cent.

Real estate transfer tax is not to be confused with real estate capital gains tax. Although both taxes apply in real estate sales, real estate transfer tax applies to the value of the real estate, whereas real estate capital gains tax applies to the realised profit.

Real estate transfer stamp duty

All cantons levy real estate transfer stamp duties when the corresponding entry of a change of ownership of real estate is entered into the landmark registry. In most cantons, those stamp duties are levied on the fair market value of the real estate and can be as high as 1.3 per cent of the value of the real estate.

Direct income tax

Legal entities domiciled outside Switzerland may be subject to federal, cantonal and communal direct income tax. Income generated from Swiss real estate or connected rights in rem, as well as income generated from claims secured by mortgages on Swiss real estate (e.g., mortgage interest payments), are subject to direct income taxation. In addition, trading with Swiss real estate also leads to tax liability. Currently, tax rates range from 12 to 21 per cent.

Withholding tax on loans secured by Swiss real estate

Interest paid on loans by a non-domestic creditor that are secured by Swiss real estate is subject to a special withholding tax of 13 to 33 per cent (depending on the canton where such real estate is located). The right to levy this withholding tax may be reduced (or totally excluded) by the interest article in a double taxation agreement between Switzerland and the residence country of the creditor.

Overview
CantonMaximum real estate transfer taxReal estate transfer stamp dutySystem typeWithholding tax on real estate secured loans
Argovia (AG)0.4%Dualistic16%
Appenzell-Innerrhoden (AI)1%0.2%Dualistic21%
Appenzell-Ausserrhoden (AR)2%0.1%Dualistic21%
Berne (BE)1.8%CHF 200Monistic21%
Basel-Landschaft (BL)2.5%CHF 300Monistic18%
Basel-City (BS)3%0.1%Monistic18%
Fribourg (FR)3%0.15%Dualistic21%
Geneva (GE)3%0.25%Dualistic20%
Glarus (GL)0.35%Dualistic23%
Graubünden (GR)2%0.1%Dualistic15%
Jura (JU)2.1%0.15%Monistic16.5%
Lucerne (LU)1.5%0.2%Dualistic20%
Neuchâtel (NE)3.3%0.15%Dualistic20%
Nidwalden (NW)1%0.1%Monistic15%
Obwalden (OW)1.5%0.15%Dualistic18%
Sankt Gallen (SG)1%0.2%Dualistic23%
Schaffhausen (SH)0.6%Dualistic18%
Solothurn (SO)2.2%Time or costDualistic18%
Schwyz (SZ)Contract valueMonistic13%
Thurgau (TG)1%0.4%Dualistic16%
Ticino (TI)1.3%Monistic33%
Uri (UR)0.2%Monistic18%
Vaud (VD)3.3%0.15%Dualistic23%
Valais (VS)2.25%0.2%Dualistic18%
Zug (ZG)180 CHF/hourDualistic13%
Zurich (ZH)0.1%Monistic17%
CHF = Swiss francs.