Real estate gains tax (Switzerland)

The real estate gains tax is a Swiss cantonal and communal tax that strikes the capital gain realised on the disposal of a property, that is the difference between the sale price and the acquisition cost increased by improvements. Its rate is most often regressive with the holding period, in order to discourage speculation and ease the burden on long-term owners.

‍

Two cantonal systems coexist. In the monist system, all real estate gains, whether realised by an individual or a company, fall under this special tax. In the dualist system, the real estate gains of legal entities and commercial buildings are subject to ordinary profit tax, the special tax being reserved for private assets. This difference has direct consequences for structuring a property sale.

‍

For example, a building bought for 3 MCHF and sold for 4.5 MCHF after fifteen years yields a gain of 1.5 MCHF. The cantonal real estate gains tax applies to that gain, at a rate reduced by the long holding period, save for a rollover in the event of reinvestment of the proceeds.

‍

This tax is a decisive parameter in valuing companies with a strong property component, where it conditions the net proceeds of an asset sale and informs the trade-off made in business valuation.