Switzerland - real estate tax guide
Federal corporate income tax (CIT) is charged at the standard rate of 8.5% on profits realised by Swiss companies or non-residents operating in Switzerland through a permanent establishment or owning Swiss property. A reduced rate of 4.25% is applicable to investment funds, associations, foundations and certain other legal entities that directly own Swiss real estate. Non-resident companies are only subject to Swiss CIT on income generated in Switzerland, e.g. income generated from Swiss real estate.
In addition, municipal and cantonal corporate income taxes are levied on rental profits. Certain municipalities and cantons do not have a specific tax on capital gains and so in these areas capital gains are also subject to municipal or cantonal tax. Municipal and cantonal tax rates vary significantly between regions. Ordinary companies in Zurich (city) are subject to cantonal tax at 19% on profit after CIT. As with CIT, there are also different municipal and cantonal tax rates applicable to investment funds, associations, foundations and certain other legal entities with direct ownership in Swiss real estate. The applicable cantonal income tax rate in Zurich (city) for such entities is approximately 9.5% (see below).
Some municipalities and cantons levy a capital gains tax on the disposal of real estate instead of municipal or cantonal income tax (see above). The applicable tax rate depends on the duration of ownership and differs between municipalities and cantons. Typical rates range between 3% and 60%.
Property transfer tax
Many municipalities and cantons levy a transfer tax on the transfer of legal title over Swiss real estate at up to 3.3% on the consideration payable (depending on the location of the municipality or canton). The canton of Zurich for example does not levy any real estate transfer tax.
Many municipalities and cantons levy an annual tax on the fair market value of Swiss real estate as determined by the tax authorities. The applicable tax rate is between 0.02% and 0.3% depending on the location of the real estate. The canton of Zurich does not levy any such tax.
Rental income and capital gains on the disposal of real estate are generally exempt from VAT. However, a lessor can opt to pay VAT on rental income, if the lessee is running a business activity that is subject to Swiss VAT from the relevant real estate. In this case, the standard VAT rate is 7.6%. Any input VAT on deliveries and services are generally partly or fully recoverable once the company is Swiss VAT registered.
The above is for general information purposes only. It is not intended to be comprehensive or to provide any specific tax advice.
This article is from 'European Property', published annually by Freeman Business Information plc, www.efreeman.co.uk .
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