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Old 08.10.2021, 19:14
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Property tax

Hi All,

say you buy a flat CHF 1,000,000 in one of the four following cantons:

Geneva
Vaud
Ticino
Zurich

What amount do you expect to pay in property taxes per year?
Thanks for any help with this.

- Josh
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Old 08.10.2021, 19:56
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Re: Property tax

Unlike other countries where property tax is a often flat rate based on the value of a home, Switzerland uses Eigenmietwert.

Eigenmietwert - don't know the French or Italian, sorry - is a theoretical rental value of your home, and functions more or less as a property tax.

An assessed value of your home is made, usually well under the market value (IIRC ours is based on something like 60-ish percent of the 2010 market value. 2010 was the last time a canton-wide assessment was made. I don't know what happens with recently sold homes, whether a percentage of the sales price is used instead.)

I'll have to look up an old tax bill - but the amount is not something that keeps me up at night*. There are lots of far more expensive 'gotchas' when one owns a home.

This theoretical amount is then added to our income, and we pay income tax on that value, at whatever tax bracket applies.

So the tax is progressive. For instance, we live in a Quartier where most of the houses are more or less similar. And the Eigenmietwert assessments are likely fairly similar. But Frau X ,who only has a small widow's pension, likely pays less on the Eigenmietwert additon than Herr Y, a gazillionaire who keeps his Steuerparadis house as a tax domicile, because they each pay at different tax rates. Which, IMO, is quite fair.

So... it's complicated and one can't really give you a flat number without knowing what assessment values are in the cantons you are considering, and what your income is.

Certainly each cantonal tax department will have information on Eigenmietwert on their website - that's a good place to start. Also, ask the seller what the current tax assessment is - but be prepared for a bit of a bump if a new assessment is triggered by the sale.


ETA:

Some background information can be found here:
https://www.ch.ch/de/eigenmietwert/

And here:
https://www.hev-zh.ch/politik/steuer...eigenmietwert/

And here:
https://www.comparis.ch/hypotheken/s.../eigenmietwert


ETA 2:

I believe that parliament is discussing/has decided on replacing Eigenmietwert, but I don't know any details or timelines. Hopefully someone who does will be along soon.



*As an American living in a low tax canton and Gemeinde, I don't have much incentive to look for ways to save on Swiss taxes - as anything I save here just ends up in Uncle Sam's pocket. If you are not burdened with the blue passport, consider seeing a tax pro for individually tailored advice. Professional advice is generally a worthwhile investment.

Last edited by meloncollie; 08.10.2021 at 20:44.
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Old 08.10.2021, 21:18
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Re: Property tax

Zero. You pay instead income tax on factual rental income (or Eigenmietwert if owner occupied - depends but easily 1/3 .. 1/2 of market rent) at your individual marginal income tax rate. You also get to save a decent amount of wealth tax by owning property (vs. equivalent liquid cash/securities) because its value is usually grossly undervalued on tax returns vs. what you paid for it.
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Old 09.10.2021, 08:02
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Re: Property tax

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Zero. You pay instead income tax on factual rental income (or Eigenmietwert if owner occupied - depends but easily 1/3 .. 1/2 of market rent) at your individual marginal income tax rate. You also get to save a decent amount of wealth tax by owning property (vs. equivalent liquid cash/securities) because its value is usually grossly undervalued on tax returns vs. what you paid for it.
Well the marginal tax rate will also go up due to the Eigenmietwert and you will end up paying a higher percentage on your overall income - correct?
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Old 09.10.2021, 08:31
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Re: Property tax

The property tax on our rustico (which we own outright) is CHF 5/year (insured value 130k).

Our main property has the Eigenmietwert thing, but has negative value for wealth tax as the mortgage exceeds the taxable value. (taxable value is 1/3 the true value around here, mortgage 1/2 the value)

Tom

P.S. When I still had the blue passport, I never paid anything to Uncle Sam, just filled out forms to show that I owed nothing. But I earned less than 200k.

Last edited by st2lemans; 09.10.2021 at 08:43.
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Old 09.10.2021, 09:17
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Re: Property tax

In Geneva you have to fill out a questionnaire to determine the deemed rent to be added to your taxable income and I think the canton is also a bit of an outlier because the deemed rent comes out close to market rent. In addition the value of the property for wealth tax is the price you pay for it.

Here is the link to the Questionnaire:
https://www.ge.ch/publication?organi...eur%20locative

Long story short, For GE if I was looking for a ball park figure I would add 2.5% of property value to your annual taxable income because that’s approx the relationship between rents and prices in the market just now then refine with the questionnaire. For a 1m property that would be 25k more taxable income and 10k more tax assuming marginal tax rate 40%.
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Old 09.10.2021, 09:30
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Re: Property tax

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In Geneva you have to fill out a questionnaire to determine the deemed rent to be added to your taxable income and I think the canton is also a bit of an outlier because the deemed rent comes out close to market rent. In addition the value of the property for wealth tax is the price you pay for it.

Here is the link to the Questionnaire:
https://www.ge.ch/publication?organi...eur%20locative

Long story short, For GE if I was looking for a ball park figure I would add 2.5% of property value to your annual taxable income because that’s approx the relationship between rents and prices in the market just now then refine with the questionnaire. For a 1m property that would be 25k more taxable income and 10k more tax assuming marginal tax rate 40%.
Wow... you buy a 1m property and then pay 10k additional tax per year? I am struggling to see the benefits of buying a property till I retire, considering that property would likely be in the region of 1.5m for the size I want.
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Old 09.10.2021, 09:37
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Re: Property tax

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Wow... you buy a 1m property and then pay 10k additional tax per year? I am struggling to see the benefits of buying a property till I retire, considering that property would likely be in the region of 1.5m for the size I want.
That's peanuts compared to US property taxes!

Tom
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Old 09.10.2021, 09:45
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Re: Property tax

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Wow... you buy a 1m property and then pay 10k additional tax per year? I am struggling to see the benefits of buying a property till I retire, considering that property would likely be in the region of 1.5m for the size I want.
But how much would you save on mortgage payments versus rent?

Take a look at the comparis link - they give an example where a family in Uster (a middling Steuerfuss) with an income of 150K and a house assessed at 1.2mio currently ends up paying about 6K additional tax.

But as long as one is sensible in what one buys, saving 6K (and well beyond) on the mortgage payment vs market rents can be easy-peasy at current interest rates. When looking at finances surrounding home ownership one has to look at the entire picture - savings and costs are often found in different places.
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Old 09.10.2021, 10:09
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Re: Property tax

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But how much would you save on mortgage payments versus rent?

Take a look at the comparis link - they give an example where a family in Uster (a middling Steuerfuss) with an income of 150K and a house assessed at 1.2mio currently ends up paying about 6K additional tax.

But as long as one is sensible in what one buys, saving 6K (and well beyond) on the mortgage payment vs market rents can be easy-peasy at current interest rates. When looking at finances surrounding home ownership one has to look at the entire picture - savings and costs are often found in different places.
Thanks mel, I had a read. I pay 1850chf per month now for a 82m2 apartment in a very good location including subletted underground parking space. The apartment isn't 'new', but 'modern enough' to have most of what I need, and I can't see me moving out unless I start a family.

Considering that, I think the benefits of buying somewhere are, at least for the forseeable future, pretty negligible given the 15-20% deposit that would be required in addition to the other related one-time and ongoing costs. It's a topic I have been thinking about as my old man was recently expressing interest in helping me get a property some day, but I thanked him and told him that it's not something I would be looking for in the near future.

Last edited by Chuff; 09.10.2021 at 10:28.
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Old 09.10.2021, 10:25
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Re: Property tax

In my experience of 2 successive houses in Canton Zurich, Eigenmietwert was very conservatively calculated by the local council and is based on about ⅔ of the market value - nor did it increase over time and now is based on well under half the current market value.

With interest-only mortgage rates below 1%, there is very little interest to offset the addition to one's income.

In all, buying was the best thing we ever did both comfort-wise and financially...
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Old 09.10.2021, 10:29
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Re: Property tax

I don't know the specific details for any of the cantons listed in the question. In Berne, property tax is based on the "Amtlicher Wert" which is based on a periodic assessment made by the canton.

The "Amtlicher Wert" is way lower than the market price. Mine has just been newly assessed, both by the "Amt" and also my bank, triggered by renovations that I made and deducted on my taxes. The newly assessed "Amtlicher Wert" took it from about 33% of the bank's assessed market value to about 50%. The real market value is presumably higher.

Property tax is due on any property, whether you live there or not.

Eigenmietwert is an additional tax applied to any property that you own and live in (or have use of, such as my parking spot). In my case this is also based on the "Amtlicher Wert".

Tax on capital is another kettle of fish. The Swiss tend to maintain a high mortgage rather than paying it off in order to reduce this tax and also because mortgage payments are tax deductible.

Lastly there is also capital gains tax. In Canada the capital gains on your principle residence is not taxed. This is not the case in Switzerland.

So back to the the original question. It's rather difficult to answer .
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Old 09.10.2021, 10:40
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Re: Property tax

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Wow... you buy a 1m property and then pay 10k additional tax per year? I am struggling to see the benefits of buying a property till I retire, considering that property would likely be in the region of 1.5m for the size I want.
To set against the cost of Eigenmietwert you can claim mortgage payments (you cannot claim rental payments when you are renting) and any renovation costs; the definition of renovation is very broad but varies by Kanton.
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Old 09.10.2021, 12:02
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Re: Property tax

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Well the marginal tax rate will also go up due to the Eigenmietwert and you will end up paying a higher percentage on your overall income - correct?
It might, it might not. Depends on the final number.

In our case, it doesn’t.
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Old 09.10.2021, 12:06
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Re: Property tax

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Lastly there is also capital gains tax. In Canada the capital gains on your principle residence is not taxed. This is not the case in Switzerland.
Er, ya, but not exactly. You only pay the capital gain when you sell the property, and if purchase another permanently residence you can defer it until that property is sold. And the longer you own, the lower the tax rate.
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Old 09.10.2021, 13:17
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Re: Property tax

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Thanks mel, I had a read. I pay 1850chf per month now for a 82m2 apartment in a very good location including subletted underground parking space.
We were paying similar until we bought it, now it's 470/month.

So, a no brainer.

Tom
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Old 09.10.2021, 17:45
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Re: Property tax

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Well the marginal tax rate will also go up due to the Eigenmietwert and you will end up paying a higher percentage on your overall income - correct?
Yeah it'll go up a little bit but insignificant to a first approximation
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Old 09.10.2021, 17:47
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Re: Property tax

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Tax on capital is another kettle of fish. The Swiss tend to maintain a high mortgage rather than paying it off in order to reduce this tax
This is horseshit. People who think like you are just bad at math or never ran the numbers themselves and just parroting bad ideas they read elsewhere. Mortgage has no effect on wealth tax, you get the same savings on that tax with or without mortgage. The savings come from the underappreciation of property's value for tax purpose. The mere fact of converting cash into property with property immediately being discounted for tax by 30+% is what provided you the savings in the first place, mortgage irrelevant.

People load up on mortgages up the wazoo because interests are ridiculously low. Where else can a nobody get money at sub 0.5% after tax???


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and also because mortgage payments are tax deductible.
The correct way to view that is that you get a discount on mortgage interest after tax, e.g 0.6% interest before tax with 40% marginal income tax rate is merely 0.36% after tax. But mortgage in principle *always* costs you some money. Ridiculously little money these days, but it's still a positive cost and not saving you anything on taxes by itself


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But how much would you save on mortgage payments versus rent?
Wrong question to ask, you're comparing apples to oranges. Rent has to cover not just mortgage (which would be only a minority part of it with today's interests, easily under 40-50%), but also maintenance, Erneuerungsfonds, Nebenkosten, income taxes, risks of ownership/letting. Of course it'll be always bigger than mortgage payments

Last edited by kerneltrick; 09.10.2021 at 19:45.
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Old 09.10.2021, 20:39
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Re: Property tax

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The correct way to view that is that you get a discount on mortgage interest after tax, e.g 0.6% interest before tax with 40% marginal income tax rate is merely 0.36% after tax. But mortgage in principle *always* costs you some money. Ridiculously little money these days, but it's still a positive cost and not saving you anything on taxes by itself
Not if you are a bank or insurance company employee or pensioner. You will usually get up to 1% of your mortgage interest paid by your employer…

…but it is counted as income and taxed. 😟
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