Proposed abolition of rental value in Switzerland: advantages, disadvantages, and consequences for homeowners


On Wednesday 12 June 2023, the National Council adopted an entirely new system of Swiss real estate taxation to replace the rental value, which could be abolished if the proposal is also validated by the Council of States.

Rental value is a central element of Swiss property taxation and is still used today to calculate the taxable income of resident property owners. It represents the theoretical rental value of a property, based on criteria such as its size, location and characteristics.

This future overhaul of the tax system is already generating a great deal of interest and debate among taxpayers:

  • Abolition of rental values for both primary and secondary residences
  • Limiting the deductibility of mortgage interest, and
  • Elimination of the deduction for maintenance costs.

In this newsletter, we present the key aspects of the proposed abolition of rental values, highlighting the advantages, disadvantages and tax consequences for swiss homeowners.

Advantages of the proposed abolition of rental value

  • Reduction of tax burden: the abolition of rental value means that resident taxpayers are no longer taxed on notional income from their own principal and secondary residences, in addition to their other income.
  • Reduction of private indebtedness: mortgage indebtedness among private households in Switzerland is very high by international standards and has increased steadily in recent years. In the interests of financial stability, particularly in the event of a sharp rise in interest rates combined with a price correction on the property market, the OECD and the FMI have repeatedly recommended that Switzerland remove these tax incentives and limit the deductibility of mortgage interest.
  • Administrative simplification: this measure removes the need to estimate the rental value of the property, thereby simplifying tax procedures for taxpayers and avoiding complex estimation procedures based on numerous factors.
  • Improvement of the financial situation of certain taxpayers: this mainly concerns people who have paid off most of their mortgage debt and for whom the rental value can no longer be reduced by deducting interest.
  • This measure will have no impact on owners who rent out their properties, who will still be able to deduct maintenance costs and passive interest.

Potential disadvantages of the proposed abolition of rental value

  • Impact on the construction industry: this new measure, which includes the abolition of the deduction for maintenance costs, is likely to discourage owners from undertaking renovation works that are already costly due to the increase in the price of materials. This could lead to a deterioration in building maintenance and have a negative impact on the construction industry.
  • An obstacle to encouraging investment in energy savings: The proposal to be able to deduct the costs of energy savings investments was rejected. This decision could hinder incentives for owners to take energy efficiency measures, thus restricting investment in this area, which is essential for the transition to a more sustainable economy.
  • Necessity to reimburse a higher proportion of mortgage debt: if mortgage interest rates continue to increase, only wealthy owners may be tempted to repay more of their debt to reduce the amount of non-deductible interest liabilities.
  • Increase in interest rates combined with the impossibility of deducting them could lead certain categories of owners into financial difficulties.

Tax consequences for Swiss homeowners

Almost all deductions will be abolished as a result of the abolition of rental values.

This proposal, which includes the abolition of the deduction of maintenance costs for homeowners, nevertheless provides for a limit on the deductibility of passive interest of up to 40% [1] of the return on taxable assets. This measure has certainly been taken to balance the situation between tenants and owners.

Only owners who are able to generate a return on their movable assets would be able to maintain the general deduction for passive interest of up to 40% of the taxable return on their assets. This measure would therefore favour the category of wealthy owners capable of generating income from their movable assets.

New homeowners would benefit from special treatment, as they will be able to deduct interest liabilities of up to CHF 10,000 for couples and CHF 5,000 for other taxpayers in the first year for an accommodation for personal use. From the second year onwards, the maximum amount of the deduction will reduce by 10% per year.

The Swiss Socialist Party (PS) has denounced a tax advantage granted to owners at the expense of tenants who “do not have the possibility of deducting their rent”. According to the PS, if the rental value is abolished, equivalent compensation and a total renunciation of deductions for passive interest must be set up.

Next steps

To date, the proposal has only been approved by the National Council, but it still has to be approved by the Council of States. Once an agreement has been reached between the upper and lower houses, the law provides for the population to vote in a referendum on the new law. It is to be expected that the political Left will oppose the proposed reform. This procedure still leaves several months, hopefully until at least 2023 or even 2024, for Swiss homeowners wishing to renovate their properties, to start their renovation work and consider restructuring their debt.



[1] The Committee for Economic Affairs and Taxation (CER) has once again examined this issue, and has indicated that it wishes to adhere to the decision of the Council of States and allow deductions of up to 70% of the taxable return on assets. The committee also instructed the tax authorities to clarify the matter. The matter will be put back on the agenda for the August 2023 meeting, before being submitted to the Council of States in the autumn session.

8 August 2023 Authors : Antoine Pioger,

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