Switzerland: property taxes
Switzerland has long been synonymous with prosperity, neutrality and high prices – the country of chocolate, banks and watches has been attracting the attention of all countries of the world for many years in a row, periodically inspiring many foreigners to buy housing in this country. Let’s try to deal with the local tax system, which you will have to face when buying, owning and selling real estate in Switzerland.
According to the Swiss Federal Law on the purchase of real estate by non-residents, the sale of real estate to foreigners is carried out on the basis of annual quotas issued for each tourist region. In some cases, these quotas are fully used during the year, as a result of which a foreign buyer has to wait for the next year or longer (in some cases up to two years) in order to obtain a purchase permit. This provision applies both to new construction projects and to property already owned by Swiss citizens or foreigners residing in that country. Non-residents who have received a quota may transfer it when reselling their property.
Taxes in Switzerland consist of a direct federal tax, a communal tax on land ownership, and a tax on the estimated rental income that accrues to owners of second residences. If a foreigner managed to acquire real estate in Switzerland, then it is necessary to be prepared for expenses, which usually amount to about 5.5% of the value of the property. This amount includes cantonal and community taxes on the transfer of property, which make up 3.3%, and notary fees in the amount of 1.7% of the price of purchased housing.
Loan and insurance
When applying for a mortgage loan, the corresponding costs will be about 0.5% – this rate varies depending on the amount issued by the bank. For example, when buying a home in the secondary market, if the previous owner issued a mortgage, the buyer will pay the difference between the previous and the new loan amount.
The future owner instructs the notary (usually by issuing a power of attorney) the obligation to ensure that all legal formalities are met, in particular, registration in the land registry and exemption from all previous mortgages for this apartment. A power of attorney is also issued to a notary to ensure that all legal formalities are fulfilled: registration in the land cadastre and exemption from all previous mortgages for this apartment.
In some cantons (for example, in the territory of Vaud) fire insurance is mandatory for buildings and furniture, which is 0.055% of the value of the insured property. It is recommended to take out insurance at full replacement cost. As for the apartment, the cost of insurance is included in the commissions of joint property.
Traditionally, annual operating costs amount to 0.8% -1.5% of the value of the property. However, the costs may be higher if the house is old and needs repair. Typically, the costs are divided between the owners of all apartments located in the building in proportion to the thousandths of each owner.
Typically, such expenses include cleaning and security fees, which are in the form of contributions. Also followed by deductions to social insurance funds, expenses for the current repair of the building and consumables. The co-ownership manager collects the appropriate amounts of money to cover all costs associated with the repair of the building. Payment is made in advance, quarterly or semi-annually. Taxes are paid to the Swiss government, canton and commune. Monthly payments for water, gas, electricity and heating are paid, insurance, landscaping, and road repair are paid. Administrative fees and other expenses are made.
For individuals, only property located in the canton and its income (income from real estate) are taxed. Other income options are taxed at the owner’s place of permanent residence. The fiscal value of the property is used to determine the taxable condition (80% of the purchase price). The amount of rent is equal to the amount that the owner would pay for renting such an apartment – it is she who forms the basis of income tax.
To the above taxes should be added the following: direct federal tax, annual tax on land ownership and tourist tax. Practice shows that the total amount of taxes is approximately 1% -1.4% of the purchase price of the property and can be reduced as part of the “tax optimization”, when it is necessary to re-evaluate the property and a corresponding reduction in fiscal value.
As a rule, income when renting real estate in high season allows you to cover almost all expenses associated with it, including the costs of joint ownership and other taxes.