Everything you need to know about taxation in Switzerland for second homes

Do you dream of buying a second home where you can spend peaceful weekends? 

Before taking any action, it is worth noting that Swiss tax rules for second homes are subject to specific regulations. These cover tax on the purchase, property tax, tax on any rental income, and capital gains tax on resale.

In this article, find out about all the tax implications of buying a second home in Switzerland.

Second homes: what taxes do you have to pay in Switzerland?

When purchasing a property in Switzerland, whether it is a primary residence or a second home, and regardless of whether the future owner is a Swiss resident or a foreign national, purchase costs are payable.

These costs include, in particular:

• Notary fees: when purchasing property in Switzerland, the services of a notary are mandatory and subject to a fee. The fees charged by this legal professional vary by canton, ranging from 0.1% to 0.5% of the purchase price.
  
• Transfer duties: in some cantons, the transfer of ownership of a property is subject to a tax known as transfer duty. This tax is not levied in all cantons. The rate is set by each canton and can vary from 1% to 5% of the purchase price.
  
• Land registry fees: every property transaction must be registered in the land registry. It is the notary’s responsibility to carry out this formality, the cost of which also varies from canton to canton. In most cases, the amount depends on the sale price of the property.

Owners of a second home in Switzerland are liable to pay property tax each year in the same way as for their main residence. All properties located in Switzerland are subject to this property tax.

This tax is calculated on the gross value of the property.

The rate varies by canton and ranges from 0% to 0.3% of the property’s gross taxable value as calculated by the tax authorities.

Any owner of a house or flat in Switzerland, whether it is a primary or secondary residence, and regardless of whether the owner is a Swiss resident or a foreign national, is liable for tax on the rental value of that property. Only owners who decide not to let out the property are exempt from this tax.

This tax is calculated on the rental value of the property, i.e. the value at which the property could be let. Each canton sets the rules for calculating the rental value of properties located within its territory, taking into account the property’s location, floor area, year of construction and market price.

Good to know: Some cantons have abolished this tax. Discover the five Swiss cities with the most dynamic property markets.

Second homes abroad: what Swiss taxes apply if you rent out your second home?

Foreign owners of a second home in Switzerland may rent out the property when they are not staying there. The income generated by this rental, known as property income, is subject to tax.

To find out which tax rules apply to this income, you should refer to the international tax treaty between the country where the property is located and the owner’s country of residence.

The Franco-Swiss tax treaty establishes the principle that property income is taxable in the country where the property is situated. Consequently, a French national who owns a second home in Switzerland must pay tax on the rental income from that property in Switzerland.

Nevertheless, the Franco-Swiss tax treaty stipulates that this income must also be declared in France on the taxpayer’s tax return under the category of property income. However, to avoid double taxation, a tax credit is paid to the owner.

To sum up:

• Property tax is payable in Switzerland. Foreign property owners must declare their property income in Switzerland and pay the corresponding tax there.
  
• In France, property income is also declared on form no. 2042, accompanied by form no. 2047 for income received abroad.
  
• A tax credit equal to the amount of tax paid abroad is deducted from the tax due in France.

Please note: The same rule applies to the Real Estate Wealth Tax (IFI). A French owner of a second home in Switzerland must declare their Swiss assets in that country and pay the corresponding IFI there. They must also declare their international assets in France, including their Swiss assets. They then benefit in France from a tax credit equivalent to the amount of tax paid in Switzerland, which can be offset against the IFI due in France.

Second homes owned by foreign nationals in Switzerland: what tax is payable on resale?

Foreign owners of a second home in Switzerland who decide to sell their property are likely to realise a capital gain. A capital gain arises when the sale price of the property exceeds its purchase price. This capital gain is subject to tax.

To find out which tax rules apply to this capital gain, you should refer to the international tax treaty between the country where the property is located and the owner’s country of residence.

For France, the Franco-Swiss tax treaty establishes the principle that income from the sale of property is taxable in the country where the property is located. Consequently, a French national who owns a second home in Switzerland must pay tax on the capital gain arising from the sale of that property in Switzerland. Just like property income and the IFI, the capital gain must be declared in France and a tax credit is granted to the taxpayer to avoid double taxation.

In Switzerland, the tax rate on capital gains from property is set by each canton. It can range from 0% to 50%, depending on how long the property has been held.

You are now familiar with the Swiss tax rules that apply if you wish to buy a second home in Switzerland. You will need to pay transfer tax on the purchase, as well as property tax and income tax if you rent out the property. 

Most of the applicable tax rules, particularly those relating to property wealth tax or capital gains tax on resale, are governed by the tax treaty signed between Switzerland and France, which prevents double taxation and determines the country in which tax is payable.