This obviously also applies to the rental of the property. As a result, despite the higher price level, good returns can still be achieved.

Enjoyment in summer or winter

If you buy a Swiss vacation home as a non-resident of Switzerland, this will in principle lead to double taxation. This is because in your country of residence, under the residence principle, you pay tax on your worldwide income. Since your second home in Switzerland is part of your world income, you report it in your tax return in your country of residence. In addition, Switzerland will also want to levy tax on this home because it is located on Swiss territory.

This means that as a non-resident of Switzerland, you will face Swiss taxation on your second home located there. To avoid this double taxation, countries usually make (bilateral) agreements among themselves on the division of taxing rights. These agreements are laid down in a tax treaty, which states which country may tax which sources of income. Generally, the taxing power of real estate is assigned to the country where it is located. This means that as a non-resident of Switzerland, you will pay tax in Switzerland on your vacation home located there.

Taxation of Swiss vacation home

Switzerland is a confederation consisting of 26 cantons. None of these cantons is the same. Each canton is different in terms of language, climate and legislation. Many tax laws are also regulated at the cantonal level in Switzerland. In addition, of course, Switzerland also has tax laws at the federal and municipal level. If you are going to buy a vacation home in Switzerland, be sure to check what tax laws apply.

Lex Koller
Once a non-resident has a Swiss source of income, they become subject to limited taxation in Switzerland. At the federal level, Switzerland has legislation that applies specifically to non-residents wishing to purchase property in Switzerland. These regulations are set forth in the Bundesgesetz über den Erwerb von Grundstücken durch Personen im Ausland, known as Lex Koller. Although this is a federal-level law, it can be implemented differently in each canton.

Permit
Under the Lex Koller, a non-resident of Switzerland needs a permit to purchase real estate there. These so-called foreigner permits are only issued in limited numbers to natural persons. Thus, a non-resident cannot purchase a second home in Switzerland without the foreigner permit.

Other restrictions
In addition to the foreigner permit, Swiss law imposes other restrictions when purchasing real estate. First, the net living area for a property may not exceed 200 square meters. In addition, a single person or a family may own only one immovable property. Third, the real estate must be used by the owner for at least three weeks per year. Finally, Swiss law does not allow a vacation home to be rented out for more than 11 months per year.

Purchasing a property in Switzerland

If you are going to buy a home in Switzerland, there are one-time purchase costs. The cost of buying a home in Switzerland varies by canton. These costs are between 2.5% and 5% and include the notary’s fee, one-time taxes for the land register and land registry and the foreign permit. In some cantons, the buyer also has to pay transfer tax (Handänderungssteuer).

If the property is located in a canton that levies Handänderungssteuer, the rate is between 0.5% and 3%. In fact, the rates vary quite a bit by canton. The basis of this tax is the value of the property, as calculated by the notary.

The owner of a vacation home in Switzerland may be subject to the levy of the Liegenschaftssteuer there. In fact, in some cantons – such as Zurich and Aargau – this municipal tax is not levied. The Liegenschaftssteuer is a municipal tax, similar to the Dutch real estate tax.

In addition to the Liegenschaftssteuer, the owner of a second home in Switzerland is liable for income tax because of the enjoyment he may have of his Swiss home. The tax is levied on an officially determined value of the home, called the Eigenmietwert. If the property is not rented out, 100% of the Eigenmietwert is taxed.

Possession and rental

However, when the Swiss home is actually rented out, income tax must be paid on the rental income received. As a result, the amount of Eigenmietwert does not count in full.

Also when selling the Swiss property, the non-Swiss owner is liable for tax. This tax, called Grundstückgewinnsteuer, is levied on the realized sales profit. This profit consists of the difference between the sale price and the original purchase price.

Selling

The amount of the Grundstückgewinnsteuer depends on a number of factors. First, it is important in which canton the property is located. This is because the Grundstückgewinnsteuer is not levied at the federal level, but at the cantonal level. A second factor is the elapsed time since the transfer of ownership.

Gifts and inheritance

Switzerland does not have gift and inheritance taxes (Schenkungssteuer and Erbschaftssteuer) at the federal level. In fact, these taxes are levied at the cantonal (and sometimes municipal) level.

Although the differences between the taxation of the individual cantons are very large, it can be noted that with regard to real estate, everywhere the situs principle is the basis for taxation. This means that a (second) home is subject to gift and inheritance tax in the canton where the home is located.