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Old 20.03.2021, 22:59
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Impact of buying property abroad in wealth tax

Hi, I got my C permit in 2020 and I'm learning about different taxes in CH. I had my declaration done by an accountant this year, and I see that I am taxed for the money I have in my accounts even if I already paid taxes for it when I earned it... this is a bit confusing to me, but OK. It means basically that if I don't do anything with the money, on top of losing some % because of inflation, I will be paying wealth tax each year...

So in parallel I had been thinking of buying property in Spain, where I am from. I would like to come back at some point, and maybe could rent it in the meantime. In the area I am interested in, prices are dropping because of covid so it looks like a good opportunity.

Now, my question is, I don't know how this will affect my taxes... let's say I have savings of 200,000 CHF cash now and I want to buy a 200,000 CHF apartment. For this I would like to use 100,000 CHF and get a mortgage in Spain for the remaining 100,000 CHF.

When I do my declaration next year, will I be taxed on wealth for the 100,000 CHF remaining in my account + total value of the property (200,000 CHF)? Do I get a deduction for the fact that I have a mortgage?

Thanks for your advice in advance
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Old 21.03.2021, 06:14
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Re: Impact of buying property abroad in wealth tax

Yes, all debts are deductible. You could even choose to declare property's cadastral value instead of purchase price, net decreasing your taxable wealth with this transaction. But why all this worry about wealth tax? It's a pretty small tax if your wealth is so low

If you rent out the apartment, that will be generate taxable income. Spain probably gets first dibs on it, but check what income tax treaty says. In Switzerland you'll still get taxed indirectly on it via an increased tax rate on your other swiss taxable income, because CH takes into account all worldwide income for determining effective tax rate.

if you don't rent out, the swiss might still impute a deemed rental income for it and tax that. In ZH for ZH properties that'd be 3.5-4.25% of tax value, but GE certainly has different rules and I'm not sure how they handle foreign properties.
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Old 21.03.2021, 15:18
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Re: Impact of buying property abroad in wealth tax

The rule applied in Switzerland is that property is taxed where it is located. So the value of a property in Spain, rent or deemed rent and maintenance expenses are not directly taxable in CH. “Not directly” because the tax rate applied to your Swiss income and wealth is calculated based on your global income and wealth. They will take the property in Spain into account for that purpose.

Mortgage and interest expense will be allocated prorata based on value of Spanish property vs other assets
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