Home Purchase in Switzerland: What Are the Tax Consequences?

Buying a house or apartment in Switzerland is an important life milestone – and comes with significant financial investment. Beyond financing, mortgages, and the purchase price, the tax implications also play a major role. Buyers should understand which taxes apply at the time of purchase, which deductions are available, and how the purchase will affect their tax burden in the long term.

This article explains the tax implications of buying property in Switzerland – from one-time costs to ongoing tax obligations.

Important note: On 28 September 2025, the Swiss electorate approved the abolition of the imputed rental value (Eigenmietwert) with 57.7% in favour. The new rules are expected to come into force no earlier than 2028. Until then, existing provisions remain unchanged. The abolition also entails the elimination of maintenance deductions and restrictions on mortgage interest deductions. Details can be found in the section "Outlook: Abolition of the Imputed Rental Value".

One-Time Taxes and Fees at Purchase

Property Transfer Tax (Handänderungssteuer)

In many cantons, a property transfer tax is levied when ownership changes hands. It typically ranges between 0.2% and 3% of the purchase price. Depending on the canton, this tax may be paid by the buyer, the seller, or split equally.

• The cantons of Zurich, Schwyz, Uri, Glarus, Zug, and Schaffhausen do not levy a property transfer tax as such (fees may still apply).
• In the canton of Bern, the rate is 1.8% of the purchase price. However, the first CHF 800,000 of the purchase price is tax-exempt if the buyer occupies the property themselves.
• The highest property transfer tax is levied by the canton of Neuchâtel at 3.3%.

Land Registry Fees

Registration in the land registry is mandatory and incurs fees. These vary by canton and typically range from 0.1% to 0.5% of the purchase price.

Notary Fees

The notarization of the purchase contract also incurs fees. In some cantons (e.g. Zurich), this function is performed by the land registry office.

Financing Through Pension Funds (Pillar 2 and Pillar 3a)

Many buyers partially finance their property purchase using pension assets from Pillar 2 (occupational pension fund) or Pillar 3a (tied private pension). Early withdrawal is permitted if the property will serve as the buyer's primary residence.

The withdrawal is taxed as a lump-sum capital payment, separately from other income, at a reduced rate. The tax rate varies by canton and the amount withdrawn. Important: Early withdrawal reduces future pension benefits and may need to be repaid if the property is later sold.

Ongoing Tax Implications After Purchase

Imputed Rental Value (Eigenmietwert)

Homeowners who live in their own property must declare a so-called imputed rental value as fictional income for tax purposes. This is determined by the tax authorities based on the location, size, and features of the property, and typically amounts to 60–70% of the market rent that could be achieved for a comparable property.

Note: The Swiss electorate approved the abolition of the imputed rental value on 28 September 2025 (see "Outlook" section). Until the new rules come into force (expected no earlier than 2028), the existing regulations remain unchanged.

Mortgage Interest

Mortgage interest payments can be deducted from taxable income. This reduces the tax burden – especially in the early years when borrowing is high.

Important: At the federal level, the deduction of private debt interest is capped at the amount of taxable investment income plus CHF 50,000. This is particularly relevant for those with high mortgage debt and low investment income.

Maintenance and Renovation Costs

Property owners can claim annual maintenance costs – either as a flat-rate deduction or based on actual expenses (with receipts). A key distinction must be observed:

• Value-maintaining investments (e.g. painting, repairs, replacing existing fixtures) are tax-deductible.
• Value-enhancing investments (e.g. adding a conservatory, expanding living space) are generally not deductible.

Energy-saving renovations receive special tax benefits. Since 2020, costs for energy-efficiency measures and demolition costs for replacement buildings can be spread across up to three tax periods if they exceed taxable income in the year of investment.

Wealth Tax

The property is part of the owner's taxable wealth and must be declared at the cantonal tax value in the tax return. The tax value is typically well below market value. Mortgage debt can be deducted as a liability from taxable wealth.

Future Property Sale

Real Estate Capital Gains Tax (Grundstückgewinnsteuer)

If the property is sold at a later date, capital gains tax must be paid on the profit. This tax varies significantly by canton. Important: The tax is degressive – the longer the property is held, the lower the tax rate. Many cantons apply a speculation surcharge for short holding periods (e.g. in the canton of Zurich, a surcharge of up to 50% for a holding period of less than one year).

Deferral Options

A deferral of the capital gains tax is possible if the sale proceeds are reinvested in a new owner-occupied property (replacement purchase). The condition is that both the old and the new property must serve as the taxpayer's primary residence, and the replacement purchase must occur within a reasonable timeframe.

Outlook: Abolition of the Imputed Rental Value

On 28 September 2025, the Swiss electorate approved the abolition of the imputed rental value with 57.7% in favour. This fundamental system change brings significant implications for buyers and property owners:

• No more imputed rental value for owner-occupied primary and second homes.
• Elimination of maintenance deductions for owner-occupied property.
• Restriction of mortgage interest deductions: Generally no longer deductible for owner-occupied property. Exception: First-time buyers can claim a limited mortgage interest deduction for ten years.
• Elimination of deductions for energy-saving and environmental measures at the federal level. Cantons may maintain their own deduction options until 2050 at the latest.

The new rules are expected to come into force no earlier than 1 January 2028. Until then, existing provisions remain unchanged. Those planning renovations or energy-saving improvements should take advantage of the transitional period while deductions can still be claimed.

Practical Examples

Example 1: Buying a House in Bern

A couple buys a house for CHF 800,000 for owner-occupation. Thanks to the tax exemption for the first CHF 800,000 for owner-occupied properties, no property transfer tax is due in the canton of Bern. However, land registry and notary fees still apply. For a higher purchase price, the 1.8% property transfer tax would only apply to the amount exceeding CHF 800,000.

Example 2: Home Financing in Zurich

A buyer finances a house with a mortgage carrying CHF 20,000 in annual interest. This interest is tax-deductible and significantly reduces taxable income. In Zurich, no property transfer tax applies – only a land registry fee.

Example 3: Financing Through Pension Fund

A buyer withdraws CHF 100,000 from their occupational pension fund (Pillar 2) for the property purchase. This amount is taxed separately from other income at a reduced rate. The tax burden varies by canton but typically amounts to approximately 5–10% of the withdrawn amount.

Common Mistakes and Tips

Common Mistakes

• Assuming there are no further tax obligations after the purchase.
• Underestimating the tax burden from the imputed rental value (applies until abolition takes effect).
• Failing to plan long-term for mortgage interest and maintenance costs.
• Confusing value-maintaining and value-enhancing investments when claiming tax deductions.
• Overlooking the tax consequences of early pension fund withdrawals.
• In the canton of Bern: Not being aware of the tax exemption for owner-occupied properties.

Tips

• Check cantonal rules on property transfer taxes and fees before purchasing.
• Include the imputed rental value and ongoing deductions in your financial planning (while still applicable).
• Structure your mortgage to optimize tax deductions.
• Clearly distinguish between value-maintaining and value-enhancing investments.
• Consider the capital gains tax implications of a future sale early on.
• When withdrawing pension funds, consider the long-term impact on retirement benefits.
• Carry out planned renovations before the new rules take effect to take advantage of tax deductions.

Conclusion

Buying property in Switzerland has not only financial but also significant tax implications. Beyond one-time costs such as property transfer tax and land registry fees, ongoing obligations arise including the imputed rental value, wealth declarations, and the taxation of gains upon future sale. Financing through pension funds also carries tax consequences that should not be overlooked.

With the approved abolition of the imputed rental value, a fundamental system change lies ahead that will significantly alter tax planning for property owners. Those who understand the current and future tax implications and factor them into the purchase decision early can plan their investment optimally and avoid surprises.