Wealth and capital gains tax on real estate

Wealth and property tax and capital gains tax

Wealth tax in Switzerland

The Swiss tax law provides for a degressive rate of 0 to 1% on wealth, which is paid annually. The determination of the rate on wealth is the responsibility of the cantons and municipalities and may vary from one place to another.

All forms of investment that are likely to generate profits both in the transfer and in the provision of periodic income remain classified as assets. Therefore, taxable assets include movable assets such as bank balances, shares in a company, life insurance policies, real estate such as buildings and land as well as investment funds in a commercial or agricultural activity.

Household goods and personal effects are exempt from wealth tax.

All persons residing or staying in Switzerland are subject to wealth tax. If real estate or business assets registered outside of Switzerland are not taxable, they serve as a basis for determining the tax rate on assets.

All assets classified as taxable assets within the jurisdiction of Switzerland remain subject to wealth tax even if the owners reside outside Switzerland.

In summary, the wealth tax applies to all assets of the taxpayer.

Capital gains tax on real estate

The rental or sale of real estate is still taxable in the Swiss cantons although the tax rate differs from one entity to another.

Real estate tax rates are higher for professionals. Swiss law imposes a standard tax rate on the income of professionals in the disposal of real estate on an equal basis with personal income tax.

For individuals, the calculation of capital gains tax on real estate is based on the difference between the acquisition value and the transfer value as well as the length of time the property was owned before being put up for sale. The rates are degressive according to the length of ownership before the sale or rental.

A disposition of real estate after 25 years of ownership is exempt from taxation if a rate of 50% applies to real estate capital gains of less than 2 years of ownership by an individual.

Real estate registration fees

The most common legal acts, especially real estate transactions, are subject to a regional registration fee. For real estate sales, this duty is extracted at the rate of 3%.

The tax on real estate property

All properties located in Geneva are subject to taxes. Taxes on real estate are different from other taxes and are known as supplemental real estate taxes (IIC). This tax is calculated on the basis of the tax value of the properties as at December 31. Debts are not deductible.

For buildings owned by legal entities, the CII is assessed at 1% if the building is occupied. For leased real estate, the CII is assessed at a rate of 1.5% or 2% depending on the circumstances (whether the legal entity is not engaged in a profit-making function, is only real estate or is engaged in a profit-making function).

If the corporation uses only a portion of its building for business purposes, a reduced rate of 1% is applied to an amount equal to the capitalization at the rate of 5% of the rent of the locations occupied by the shareholder. This is assessed through comparison with similar premises. The eventual surplus of the value of the building is estimated at a rate of 1.5% or 2%.

Buildings of the HBM, HLM and HM types

The other types of buildings and buildings of type Immeubles d’habitation bon marché (HBM), immeubles d’habitation à loyers modérés (HLM) and immeuble d’habitation mixte (HM) can benefit from a reduction with respect to complementary real estate tax. As of August 5, 2010, buildings that meet high or very high energy performance standards benefit from an additional real estate tax reduction for 20 years.

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