Buying real estate abroad is an attractive investment for many individuals residing in Switzerland. There are important tax aspects to consider, especially regarding the Swiss tax return.
Tax Treatment of Foreign Properties in Switzerland
Although Switzerland has double taxation agreements with numerous states, foreign properties must be declared in the Swiss tax return. This is because worldwide income and assets are considered for the tax rate calculation.
Tax Value of a Foreign Property
Let's take the example of a Zurich couple purchasing a vacation home in France. The tax value and imputed rental value of the property, minus maintenance costs and mortgage interest, must be declared as assets or income in the Swiss tax return.
Imputed Rental Value and Its Tax Treatment
The imputed rental value is the amount that the owner could generate as rent if the property were rented out. This value is subject to taxation as income. The calculation of the imputed rental value varies depending on the canton. For rented properties, actual rental income must be reported.
Tax Optimization
There is an opportunity to reduce the imputed rental value by deducting maintenance costs. A lump sum deduction is possible, with the amount varying depending on the canton. If the actual costs are higher, they can be claimed instead of the lump sum deduction.
