Rental value abolished, tax system revised
The Swiss Union of Real Estate Professionals (USPI Suisse) is the leading umbrella organisation for real estate specialists in French-speaking Switzerland. It is comprised of the cantonal associations of the real estate economy established within the six Romand cantons. In this capacity, it represents some 400 firms and several thousand professionals working in brokerage, property management, development and real estate valuation. Consequently, our members oversee around 80% of properties managed in Romandie, representing thousands of owners and influencing the living conditions of hundreds of thousands of tenants.
In anticipation of the 28 September 2025 vote, USPI Suisse campaigned against the abolition of imputed rental value. We have consistently maintained that, while we endorse the removal of this tax, it is imperative that the full range of existing tax deductions for homeowners is preserved. New tax incentives for tenants were also to be introduced to ensure equal treatment, a principle emphasised by the Federal Supreme Court in its 11 December 1996 ruling (ATF 123 II 9).
However, the Swiss electorate and the cantons took a different approach, granting the cantons the power to introduce a new tax on secondary residences at a cantonal level. As this measure was intrinsically linked to the abolition of imputed rental value, the latter has consequently been repealed. This reform is projected to come into force in 2028 at mthe earliest. It remains uncertain at present whether the cantons will introduce a new levy on secondary residences that could be higher than the current tax based on imputed rental value.
Definition and History: The Concept of Imputed Rental Value
A homeowner who lives in their own property has a clear advantage, as they act as both landlord and tenant. They thus benefit from a theoretical rentalincome received ‘in kind’. To balance this, the taxpayer incurs costs ranging from financing to maintenance and repairs, which can be deducted from their taxable income in accordance with the net value principle.
Since its inception in the 1930s and formal legal enshrinement in 1958, the system has undergone numerous parliamentary interventions and initiatives seeking to alter or abolish the tax. The most recent of these, a parliamentary initiative titled ‘Taxation of Housing: A Systemic Change’ (17.400), was successfully adopted by the Federal Chambers.
The Substance and Implications of the Rental Value Reform
The Repeal of Rental Values and Selected Deductions
This reform envisages abolishing imputed rental value for both primary and secondary residences, in both federal and cantonal jurisdictions. In exchange, deductions for maintenance, renovation costs and insurance premiums will be discontinued. Consequently, the construction sector may experience a significant increase in orders in the lead-up to the reform’s implementation, followed by a potential sharp decline in demand. At the federal level, deductions for energy-efficient renovations will also be withdrawn. However, the cantons may continue to grant deductions for cantonal and communal taxes until 2050. Furthermore, owners of investment properties will no longer be permitted to deduct the cost of energy-efficiency improvements at the federal level.
It is not yet clear whether the cantons will choose to maintain existing deductions for such work. If these deductions are maintained, it raises the questio of whether they will remain in their current form, be expanded, or be more strictly curtailed than the current system allows. mOn the one hand, property owners are encouraged, indeed often compelled, to modernise and decarbonise their buildings. On the other hand, federal tax incentives are being dismantled and federal subsidies could be drastically reduced amid the government’s budgetary constraints. Energy retrofitting is therefore set to become a more costly endeavour, potentially forcing a number of owners to sell their energyinefficient properties.
This, coupled with ambitious cantonal energy legislation, is set to trigger immense demand for renovation work. This will inevitably lead to inflated costs for materials and labour, not to mention the significant delays expected in carrying out the work and in administrative procedures. When selling an energy-inefficient property, the vendor may face a price penalty as prospective buyers will no longer be able to benefit from tax-deductible energy renovations. This price drop could be even more pronounced for energy-inefficient secondary residences, as buyers may also be liable for a new tax. As for taxpayers subject to expenditure-based taxation (the lump-sum tax), their situation is unlikely to change significantly, as the deemed rental value is only one factor among others used to determine the amount of tax, and the use value of the property acquired by the taxpayer will continue to be taken into account as one of their main expenditure items.
A significant curtailment of mortgage interest deductibility
Regarding the deduction of mortgage and other passive interest, such relief is now limited to a proportion of the value of Swiss real estate assets (excluding primary and secondary residences) relative to the taxpayer’s total net worth. In other words, individuals whose wealth comprises solely their primary or secondary home, or who lack yield-bearing property, will be unable to claim any deductions, including interest on commercial loans. When they initially acquire a property for personal use, taxpayers can deduct the private passive interest attributable to that residence during the tax year after its purchase. This is capped at CHF 10,000 for couples and CHF 5,000 for individuals, with the maximum deductible amount decreasing by 10% each year. The question of mortgage debt amortisation inevitably arises. On the one hand, by repaying the debt, the owner ties up capital and, given the relatively low mortgage rates, could obtain higher returns in other investments. On the other hand, the taxable portion of their wealth will naturally increase. Furthermore, given the Confederation’s fiscal constraints, a heavier tax burden on second and third-pillar withdrawals cannot be ruled out, which may deter the repayment of mortgage debt.
Transferring the family home into a company could be an option to continue deducting mortgage interest; however, the company’s income will also be taxed, as will the movable wealth (shares in the company), which will also be included in the shareholder’s wealth.
Interview by Frédéric Dovat – Secretary General of USPI Suisse
