Federal Council supports the abolition of fictitious rents for Swiss landlords


In Switzerland, landlords must add a fictitious or fictitious rent to their taxable income, which is calculated according to the floor space of the accommodation. Proposals to eliminate imputed rent have been around for some time. This week, the Federal Council voted in favor of an abolition project presented earlier by a committee of the Council of States, Switzerland’s upper house.

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The Federal Council’s main motivation for changing the current system, which also allows tax deductions for mortgage interest and home maintenance, appears to be to remove the incentives it creates for mass borrowing.

The Federal Council also proposes to abolish fictitious rents for second homes in order to simplify the system, to continue to allow interest deductions for rented accommodation and to allow deductions for renovations aimed at improving environmental efficiency. buildings, a provision that would last until 2050.

Whether the changes reduce or increase the overall tax intake depends on the prevailing interest rates. If interest rates are high, tax deductions will generally exceed imputed rent added to taxable income. So changing the system when interest rates are high will increase overall taxable income and bring in more tax money. With today’s low interest rates, the opposite is true. At an interest rate of 1.5%, the federal, cantonal and communal governments would lose around 1.66 billion francs under the changes suggested by the Federal Council. However, at an average mortgage interest rate of 3.5%, the government would receive additional income of 150 million francs.

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