Property gains tax: How is it calculated, depending on the canton?

When a property is sold in Switzerland, the profit generated is taxed. The method of calculation differs from canton to canton, but is based on two pillars: the amount of profit made and the length of time the property has been owned. In addition, under certain conditions, it is possible to benefit from a tax deferral. In this article, FGP Swiss & Alps explains how property gains tax works and helps you calculate the approximate amount you will have to pay.

What is property gains tax?

If an owner makes a profit on the sale of a property (home or land), he or she is liable for property gains tax. This occurs when the difference between the purchase price and the sale price is favourable to the seller. Many costs can be deducted from this profit:

• Selling expenses: brokerage commission, expenses incurred in publishing the advertisement, compensation for early cancellation of the mortgage, etc.
• Costs associated with the purchase: transfer duties, notary’s fees, investments that have added value to the property (such as improvements).

Instead of the purchase price, it is possible (and in some cases preferable) to take into account the tax valuation, provided that it has been in force for at least 10 years. You can find it on the extract from the Land Register or on a tax notice. You can use the most favourable value at the time of sale.

How is tax calculated on the gain from a property sale?

The calculation of tax on property gains varies from canton to canton. However, it is based on two fundamental principles: the tax scale may be proportional or progressive, but in all cases takes account of the length of ownership.

• Under the proportional tax scale, each gain is taxed at the same rate. This rate decreases according to the length of time you have owned the property: the longer you own it, the less tax you pay on the gain. For example, in the canton of Geneva, gains are taxed at 50% for less than 2 years of ownership.
• In the case of the progressive scale, the tax rate varies according to the gain made and the length of time the property has been held. In the canton of Valais, for example, tax can rise to almost 40% if you have held the property for less than 1 year and the profit exceeds CHF 100,000.

When can tax be deferred?

In certain situations, tax on property gains can be deferred. This happens when the change in ownership is the result of an inheritance, a gift or the advancement of an inheritance, or if it occurs within a couple.

Another possibility is if the proceeds of the sale are reinvested in a new home to be used as a principal residence, again in Switzerland. The transaction must take place within a “reasonable period”: between 2 and 4 years, depending on the canton. Tax is deferred on the portion of the profit invested in the new property.

Please note: this is a deferral, not a cancellation. The tax is paid retrospectively when the property is sold to a third party, and relates to the initial purchase price. The length of time that the previous owner owned the property is taken into account.

How is property gains tax calculated by canton?

In the cantons of Fribourg, Geneva and Vaud, gains are taxed proportionally.

• Fribourg: tax rate of 35.2% for a holding period of up to 2 years, and up to 16% after 15 years. If the profit exceeds CHF 400,000 for a property owned for less than 5 years, tax is increased by 40%.
• Geneva: tax rate of 50% for less than 2 years, with a minimum of 10% for 25 years and more.
• Vaud: maximum tax rate of 30% (1 year of ownership) and up to a minimum of 7% (from 24 years of ownership).

In the cantons of Berne, Jura, Neuchâtel and Valais, gains are taxed progressively and according to the length of ownership.

• Berne: maximum tax rate of 40%, reduced by 2% for each year of ownership, with an increase from 10% to 70% for a period of ownership of less than 5 years. The progressive rate is 1.44% on the first CHF 2,700 and rises to 8.1% on gains in excess of CHF 195,300.
• Jura: tax rate of 3.5% for profits of up to CHF 50,000, 4.5% for profits of up to CHF 100,000 and 5.5% for profits of up to CHF 200,000. From 10 years of ownership: 1% tax reduction per year.
• Neuchâtel: tax rate of 10% on the first CHF 5,000 and up to 30% on profits in excess of CHF 135,000. From 5 years onwards: reduction of 6% per annum.
• Valais: tax rate of 19.2% up to CHF 50,000, 28.8% up to CHF 100,000 and 38.4% thereafter. A progressive reduction applies for each year of ownership, with a maximum of 1%, 2% and 3% respectively after 25 years.

If you expect to make a substantial profit on the sale of your property, it may be worth calculating your future tax on property gains. Ask your broker for help.