If you own a property abroad, you do not have to pay tax on it in Switzerland. However, the property must still be declared in the Swiss tax return, as worldwide income and assets are used to calculate taxes. You can find out how foreign real estate is valued in this blog post.
Tax value of a foreign property
An example: a Zurich couple buys a holiday home in France. The tax value of the property is CHF 50,000. In the Swiss tax return, the couple must declare the tax value of the property as assets and the imputed rental value after deduction of maintenance costs and mortgage interest as income. The tax value is calculated differently in each canton. In the canton of Zurich, the taxable value is 70% of the purchase price.
Calculation of tax rate
The couple's total assets of CHF 150,000 are thus taxed at the rate of CHF200,000 (CHF 150,000 + CHF 50,000). The same principle is applied to the income tax. It should be noted that taxes in Switzerland are calculated progressively. Therefore, the tax rate for CHF200,000 is higher than for CHF150,000.
Imputed rental value
The imputed rental value of owner-occupied property is subject to income tax. It corresponds to the amount that the tenant would have to pay as rent if the property were rented out. The owner does not receive any monetary income from rental income when he occupies the property himself, but the benefit is credited to him as income.
The calculation of the foreign imputed rental value varies from canton to canton. In the canton of Zurich, the imputed rental value for a foreign single-family house is 3.5% of the taxable value and 4.25% for a condominium. If the property has been rented out, the actual rental income (excl. ancillary costs) must be declared.
Calculation of tax rate
The Zurich couple has a total income of CHF 100,000. The imputed rental value of the holiday home in France is CHF 15,000. The Swiss income of CHF 100,000 is therefore taxed at the rate of CHF 115,000.
Tax optimisation
It is possible to reduce the imputed rental value by deducting the maintenance costs. The lump-sum deduction can be claimed, which is between 10% and 20% of the imputed rental value. If the actual costs exceed the lump-sum deduction, these can also be deducted.
