Switzerland Considers Abolition Of Property Tax

by Ulrika Lomas, Tax-News.com, Brussels

24 June 2009

The Swiss Federal Council has recently recommended that the highly controversial annual property tax currently levied on Swiss real estate be abolished.

Despite rejecting outright an initiative put forward earlier this year by the Swiss Homeowners Association HEV Schweiz, proposing to exempt retired individuals from the property tax, the Federal Council has acknowledged the need to take urgent action in order to address the issue and to simplify the existing system.

Defending its decision, the Federal Council claimed that the association’s proposal was unfair, as it only applied to a limited group. The Council also argued that implementation of the initiative would prove overcomplicated and burdensome for the tax authorities.

In a counter proposal, however, the Council has advocated abolishing the property tax for all homeowners. As a result, existing measures granting tax deductions to individuals would also be withdrawn.

Nevertheless, according to the Council, two key measures would remain in place, namely the measure granting deductions of mortgage interest for a first home (for a limited period), and the measure enabling costs associated with energy-saving work and environmental protection to be deducted.

Given that abolition of the property tax may lead to a significant loss in tax revenue for the Swiss cantons, particularly those where there are a significant number of second homes, the Federal Department of Finance is to liaise closely with the various cantons to analyse the problem and to propose appropriate solutions.

Based on the fair market value of a property, as determined by the tax authorities, the property tax is currently levied in many Swiss municipalities and cantons.

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