I am a Swiss resident living in the German part of Switzerland. I am seriously looking at a purchasing a chalet in the French part. I guess my question is, do you get taxed at your main residency? I guess that your wealth tax liability would go up. Is there anything which I should be aware of, which may be isn`t obvious! Any comments welcolme.

Yes there are two taxes you pay on your holiday home:

(1) You pay Capital Tax based on the value by the canton.

(2) You pay Income Tax on the rental market value of the property less incidental running costs. That is the real bummer and caught me totally out.

Thanks Cashboy- I guess that is irrespective of whether the property is rented out or not!

Yep! The Income tax is based on rental value, irrelevant whether it is rented out or not or if you even stay in it or not.

I got hit by that badly last year, I got an "invitation" to pay the tax for 2010 - which I did, then 2 weeks later one for 2008, and 2 weeks after that the bill for 2009 arrived- I rang and asked why I was being hit 3 times and why they didn't send the 2 previous years earlier - no answer , just pay up without delay...

Yes it is and if you do rent it out, that income will be added to the notional rental value.

Clear this up for us please.

Are you saying that you pay tax on the rental value irrespective of whether you rent it and then you pay tax on any rent you actually receive renting the place?

Yes, this is what happened to friends of ours. They declared their rental income as it was less than the notional value and thought this would lessen the tax due. In fact it had the reverse effect and the two were added together.

We also own a second place which we have rented. We have not received any tax bills as yet. Our friends are on a C permit, whilst we are Swiss, although I can't imagine this would make any difference.

I think you would need to check up on this.
I would get your friend to query this with the Tax Office.

I would expect the Income Tax you would pay would be on the higher of the Actual Rent Received - Actual Costs or Market Rental Value as given by Canton - Allowed Incidental Costs.

I say this because I think that the reason that they charge tax on rental value is to put people off from buying property and leaving it empty. this would create more demand for property (from locals) and create a price boom which from what ican see the Swiss arev trying to avoid which is the reason the country is not in a mess like the UK and USA.

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I do not have friends..........I have contingent liabilities

My friend is pretty savvy (Director of a large bank). I'll check it out with him again when I next get the chance.

With regards to Telandy's original question, although the running costs of a second property are obviously not unexpected, I would just caution that they can be pretty high. Our 4 and a half room mountain apartment costs us about a third more to run than our 6 and a half room house. This is mainly due to the costs of heating and snow clearing, which can be pretty expensive. That said, owning a second home has opened up a whole new world for us and we haven't regretted it for one moment.

Another cost I forgot to mention which may apply is "tourist tax". Where we are (in the German speaking part) we have to pay for "Guest cards" annually. For our family of four the cost is around CHF 550 per year. The cards give us discounts on various things (although I wouldn't say that the cost evens out for us) and are obligatory.

We have also declared to the tourist office that our apartment will be rented (although we do this privately and are not registered for rent with the tourist office). Visitors to the area also have to buy visitor cards and we pay a tax of around CHF 250 (annually) to the tourist office (amount varies on how many beds you have available for rent). This tax enables visitors to our property to receive a more favourable visitor card which gives them many more concessions in the local area.

I wouldn't know if these taxes apply in the French speaking part. I don't recall ever being required to pay a tourist tax there ... maybe something else to check up on.

Another cost you will surely have thought of but could do with factoring in, is the cost of annual lift passes. We pay CHF 2,600 for a family of four (2 adults, one youth and one child).

I am also sure that you are aware that if you need a mortgage on your prospective property, most banks will require a 40% deposit rather than the normal 20% on your main home.

On the up side though, mainly for reasons peculiar to our area and our particular buillding, we have made a hefty paper profit on our purchase. Not the same as money in the bank, I know, but its nice to think that something we very much enjoy has also been a sound investment.

Maybe ask the cantonnal authorities in Frauenfelt ?

Your wealth would not go up as you are not buying the place with money from the air, but with money/investments you already have. If you didn't previously declare this source be aware you will be back taxed on it. But with a mortgage, the interest is tax deductible.

Eigenmietwert (the notional amount you gain by not pay rent) would apply and this weather you rent it out or not. Renting out would be taxable is income - less expenses.

Grundstückgeweinsteuer - capital gains on sale would also apply.

All that said a lot of Swiss do buy second homes, so there must be something in it...

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I actually get the impression that the Swiss seem to buy a holiday home but rent their home.
This could be because they work in Zurich and could never afford to buy but could afford to buy a holiday home in Ticino.

As you say, if you are buying with cash that is declared on your Tax Return for Capital Tax, there is no additional tax to pay on this as it is just a different asset.

I cannot see how you would pay income tax on the rental value of the property and then on top of this, tax on income on rent received from tenents.
Then surely you would put the property into a Ltd Company; and even possibly an English LTD Company to get round this possibly.

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I do not have friends..........I have contingent liabilities

How does this work for a property outside Switzerland that I'm not getting any rental income on? Do I have to pay the rental value there too, and if yes, how do I determine it?

I think you just have to declare the properties value and any outstanding mortgage. This is the information I give my accountant!

As owner of a property you have an Eigenmeitwert valuation which you add to your income, then income from rent is also added to your income. However, there should be plenty of scope for deductions here. Placing a single property in a company is not necessary and would likely bring more complications than it would solve...

So the Eigenneitwert is tax plaid to the Canton and Comune where the building physically is?
So that to me is really Council Tax/Community Charge as opposed to Income Tax in my mind.
The income from actually renting is real Rental Income Tax.

no, AFAIK, Eigenmietwert is considered income and so payed to your canton and Gemeinde of residence. Property tax for the same building goes to the community where it is physically located.

The "Eigenmietwert" (valeur locative) is the theoretical rental value the tax authorities computes to properties occupied by the owner or used by him. It does not apply to properties rented out (in that case only the rental income is added to the other income, not the rental value). If a second house is partly rented out and partly used by the owner (let's say 50/50), then the rental income for the 6 months will be added to the other income and the theoretical rental value for the other 6 months will be added also. The full rental value does not come in addition of the rental income, only the part that correspond to own use. The tax saving door quickly opens: how will the tax authority know how much days you have rented it out and how much days you occupied it for your own usage? It depends what you declare on the tax return. And I would clearly try to reduce as much as possible the part of own occupying... (if I had a second house indeed...)