Home » Economy » Taxation of residential property – The most important questions on the elimination of private lettings | News

Taxation of residential property – The most important questions on the elimination of private lettings | News

Monday, August 21st, 2017 | Economy

"The self-hire tax is an abstruse construct that causes us to die with debt," says Donato Scognamiglio, real estate expert and CEO of IAZI. For weeks, this "abstruse construct" among Swiss real estate owners has been up-to-date, as the economic committees of the National Council and the Council of States are now seeking to abolish the taxation of the private leasing value.
Abolition has been an issue in politics for decades, but nothing has happened so far. Now it should be so far: "From the mood we are currently so close to an abolition, as never before," Scognamiglio is convinced.
The rental value is a notional rental income on self-owned residential property, which is subject to income tax. In return, mortgages and maintenance costs can be deducted from taxes. This system provides incentives not to pay off mortgages. As a result, Switzerland currently has one of the highest levels of private house debt in international comparison.
For homeowners and banks, a new regime means a change. Here are the most burning questions on the subject:
Is the abolition of the own rental value definitely?
No. Although the chances of an abolition are almost as good as never before, the concern is not yet through. Scognamiglio: "I am assuming that the leasing rate and the deduction of debts will be abolished, but the precise structure is not yet defined, there may be exceptions, such as possibly for first-time owners of real estate." The National Council Commission keeps open the possibility of deductions and will also exclude second homes from the change of system.
What changes are the self-hire-worth abolition for owner-occupiers?
Until now, homeowners had incentives not to repay their mortgage because they were tax deductible. With the new system, this incentive for debt falls away. Mortgage repayments will increase as private debt in Switzerland will decrease. Whoever signs a mortgage should, therefore, in the future pay close attention to the conditions on which premature repayments are possible. Partially these are expensive.
Who benefits from the abolition?
Debt abolition is no longer "punished" in the new system. "For older people who have already paid off their mortgage, the abolition is a good news," says real estate expert Scognamiglio, but there is no longer any self-hire tax, and on the other hand the deduction possibilities are also missing Calculate whether the abolition would be beneficial or not. In principle, those homeowners benefit from the abolition, which have a deep mortgage.
Will there be less maintenance work on real estate?
If, with the new system, maintenance work is no longer tax-deductible, there is actually the risk that homeowners do less renovations. But the politicians are aware of this danger. "We have to check that the maintenance of the properties is not neglected because of the lack of deductions," FDP National Councilor Hans-Ulrich Bigler said recently. It is therefore conceivable that certain maintenance work will continue to be deductible.
Who are the losers of an abolition?
First and foremost the banks. Scognamiglio said that if the company continues to pay for itself, it will have to pay a small profit, which means that clients are running away, "says Scognamiglio.
How far has the political initiative advanced?
Last week, the National Council Commission voted unanimously on the initiative "system change in home ownership taxation". Now the ball is at the Council of States, which has to work out a concrete law proposal as soon as possible. In autumn, the initiative is expected to enter the National Council. Until then, various interest groups will try to influence legislation in their favor.
In the past, several attempts were made to abolish the own rental value. Why should it work out now?
The homeowners' association (HEV) wanted to retain the tax deductibility for homeowners in spite of the fact that the tax on self-leased value tax was canceled, which was not accepted from the left. However, since this spring, the HEV is prepared to waive the deduction for debt interest and property maintenance if a system change is made possible. Therefore, it is a politically favorable moment for abolition.
In addition, the rental value is tied to house prices. In the last few years these have increased massively, which has also increased the value of the rent. For many homeowners this is a big annoyance.


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