Selling a property is a big step for many people and is often associated with a pleasing profit. However, this profit is not tax-free in Switzerland. The so-called property gains tax, often simply referred to as house sale gains tax, is due and, depending on the canton and situation, can account for a considerable proportion of the proceeds. As property experts at we-net.ch, we would like to give you a clear overview of this important topic so that you can start your house sale well prepared.
What is the profit tax on house sales?
The profit tax on house sales is a cantonal tax levied on the profit realised from the sale of a property. It is a property tax, which means that it is applied directly to the sale of the property and not to the person selling it. The federal government does not levy this tax, but the Federal Act on the Harmonisation of Direct Taxes of the Cantons and Municipalities stipulates that the cantons or municipalities must levy it.
The taxable profit is calculated from the difference between the sales proceeds and the so-called investment values.
Formula:
Property profit = selling price investment costs
The investment costs include not only the original purchase price, but also other items that you can deduct for tax purposes.
What is taxable and what can be deducted?
Taxable profit:
The taxable profit is the pure profit you realise on the sale of the house. It is calculated by subtracting the following deductible costs from the sale price:
- Purchase price at the timeThe price you paid for the property at the time.
- Incidental purchase costsCosts incurred on acquisition, such as notary fees, transfer tax, land registry fees or estate agent commissions.
- Value-enhancing investmentsCosts for structural measures that have increased the value of the property. This includes, for example, the addition of a conservatory, the installation of a new kitchen or the installation of a photovoltaic system. It is important to distinguish this from value-preserving measures (such as a new coat of paint), which are generally not deductible.
- Selling costsYou can also deduct the costs you incur for the actual sale. These include the commission for the estate agent, advertising costs or the fees for the notary.
ImportantThe profit is not subject to normal income or company tax, but exclusively to the cantonal profit tax on house sales.
Exemptions and tax deferral
There are certain situations in which the profit tax on house sales is deferred or even waived. One of the most important exceptions is the so-called replacement purchase of owner-occupied properties.
If you sell your home, which you have permanently and exclusively lived in yourself, and reinvest the proceeds of the sale in a new, also owner-occupied property in Switzerland within a certain period (usually two years), you can apply for a tax deferral. In this case, the tax is not due, but is “deferred” until the next sale that is not replaced.
Other cases in which the tax is deferred are
- Change of ownership through inheritance, gift or advance withdrawal.
- Change of ownership between spouses in the event of divorce or matrimonial property law.
Cantonal differences: How high can the tax be?
The amount of profit tax on house sales in Switzerland varies greatly from canton to canton and sometimes even from municipality to municipality. There is no standardised regulation. The tax rate depends mainly on two factors:
- The amount of the profit: A progressive tax rate applies in most cantons. This means that the higher your profit, the higher the tax rate.
- The holding periodMost cantons grant a deduction the longer you have owned the property. However, if the property is held for a very short period, often less than five years, a surcharge is levied which significantly increases the tax burden. This is intended to make speculative property trading unattractive.
The tax rates can vary greatly depending on the canton and the factors mentioned. For example, the tax burden on a property gain can range from around 10% to over 60% of the gain.
- In some cantons, such as Basel-Stadt, a high tax rate of 60% may apply for a short holding period of less than three years.
- In contrast, other cantons significantly reduce the tax burden for long periods of ownership. In the canton of Geneva, for example, the tax burden is reduced to 0% if the property is held for more than 25 years.
- The progressive rates often start at lower rates for smaller winnings (e.g. 10% on the first CHF 4,000 of winnings in Appenzell I.R.) and increase significantly for higher winnings (e.g. up to 40% for winnings in excess of CHF 100,000).
It is therefore essential to know the specific regulations of the canton in which your property is located in order to obtain an accurate estimate. Professional estate agents such as we-net.ch can help you determine the exact tax regulations for your property.
Private vs. commercial sales
It is important to distinguish between the sale of a private property and commercial property trading.
- Private sellerAs a private individual who sells a property from your private assets, you are subject to house sale profit tax. The profit from the sale is exempt from direct federal tax.
- Commercial sellersIf you sell a property from your business assets or are considered a professional property dealer, the profit is taxed as income from self-employment. This can lead to a higher tax burden and is subject to different calculation bases.
The distinction can be complex and depends on various criteria, such as the frequency of sales, the short holding period or the use of significant borrowed funds. If in doubt, professional advice is essential.
Conclusion and your next step
Income tax on house sales is a complex issue that requires careful planning. With the right knowledge and the support of experts, you can optimise your tax burden and avoid unpleasant surprises.
At we-net.ch, we are at your side as a competent partner to simplify the entire sales process for you. From the professional valuation of your property to the correct handling of all tax aspects - we ensure that you achieve the best possible proceeds.
Would you like to find out more or receive a free, no-obligation valuation of your property? Contact us today!
