When a property owner resells real estate in Switzerland at a profit, they must pay property gains tax. This tax, levied by the cantons, often represents a significant cost in a transaction. It is therefore essential to understand how it works and how to calculate it.

General principle of property gains tax

Property gains tax applies to any sale that generates a capital gain. It is calculated on the difference between the sale price and the acquisition price, after deducting certain costs. Unlike other taxes, it is a one-off tax: it is due only at the time of sale.

In practice, the tax authority of the canton where the property is located is responsible. The notary often withholds around 5 to 10% of the sale price to guarantee payment and then submits the declaration to the tax authority. If the amount withheld exceeds the final tax, the difference is refunded; otherwise, the seller must pay the remaining balance.

How to calculate the taxable gain

The calculation is done in three steps:

1. Sale price

• - Transaction amount, net of any reductions

2. Adjusted acquisition price

• - Initial purchase price
• - Tax value, if the price is unknown, for example in the case of an old inheritance
• - Acquisition costs:
  • Notary fees
  • Transfer duties
  • Registration fees
• - Work generating added value:
  • Extension
  • Renovation or conversion
  • Swimming pool
  • Lift
  • Solar panels
  • Installations that sustainably increase the property’s value

3. Selling costs

• - Brokerage commission
• - Notary fees related to the sale
• - Early mortgage repayment penalties, depending on the canton
The taxable profit therefore generally corresponds to:

Sale price – (acquisition price + acquisition costs + value-enhancing investments + selling costs)

The years of ownership play a key role: they determine the applicable tax rate. In the case of inheritance or donation, the years of ownership of the deceased or the donor are generally added to those of the seller, which can reduce the tax burden.

Deductions and the importance of supporting documents

To benefit from deductions, it is essential to keep all invoices and proof of payment since the acquisition of the property. These documents are normally not subject to limitation periods: they can be used years later, including by heirs, to reduce the tax when the property is resold.

Cantonal tax scales: a decreasing tax

The cantons set their own tax scales. In all cases, the tax is decreasing: the faster the resale, the higher the rate; the longer the property is held, the lower the rate.

Valais: the rate depends both on the amount of the gain and on the holding period, with several brackets. For example, a gain of CHF 70,000 after 6 years results in approximately 18% tax. After 25 years, the minimum rate drops to between 1 and 3%.
Vaud: the scale is based solely on the holding period: approximately 30% in the first year, then gradually reduced to around 7% after more than 24 years. Years during which the property was used as the main residence count double. The rate already includes the municipal share.
Geneva: very high rate in the event of a quick resale, 50% if less than 2 years, then decreasing: 40% after 2 years, 30% after 4 years, 20% after 6 years, 15% after 8 years, 10% after 10 years, and only 2% after 25 years.
Fribourg: decreasing scale based on the holding period. 22% up to 2 years, 20% up to 4 years, 18% up to 6 years, 16% up to 8 years, 14% up to 10 years, 12% up to 15 years, and 10% from 15 years onwards. Specific feature: 60 centimes of municipal tax are added for each franc of cantonal tax, which increases the final amount.
Depending on the canton, specific surcharges may apply to certain large gains or short holding periods. The rates are provided for information purposes only; the effective rates should be checked in the legislation in force at the time of sale.

Cases involving professionals and companies

Real estate professionals and companies, such as developers, architects and property management firms, are generally taxed in the cantons of Fribourg, Geneva, Neuchâtel, Vaud and Valais on their commercial profit according to the ordinary scale, either income tax or profit tax. A private individual may be reclassified as a professional, particularly if they carry out frequent transactions or participate in a company with a real estate professional to develop a real estate project. In this case, AHV social security contributions also apply to the gain. The gain thus realised will then be subject to income tax, added to the taxpayer’s other income, and not to property gains tax. In case of uncertainty on these points, consulting a tax specialist is recommended.

Tax deferral: replacement purchase

If the seller reinvests the proceeds of the sale in a new main residence in Switzerland, they can normally request a replacement purchase deferral. This is not an exemption, but a deferral: the tax will only be paid when the new property is resold. Most cantons require the new purchase to take place within two years of the sale. If the new property costs less than the one sold, only the portion of the gain reinvested is deferred, while the difference remains immediately taxable.

Calculation example

Let us imagine an apartment purchased for CHF 600,000, with CHF 90,000 of value-enhancing work and CHF 20,000 in costs. It is sold for CHF 890,000 after 5 years:
890,000 – (600,000 + 90,000 + 20,000) = CHF 180,000 of taxable gain
In Geneva, after 3 years, the applicable tax rate on real estate profits and gains, also known as IBGI, is 40% → tax of CHF 72,000.

Best practices

• 1. Keep the notarised purchase deed
• 2. Keep all invoices for work carried out
• 3. Anticipate the tax declaration
• 4. Check the conditions for replacement purchase deferral
• 5. Compare cantonal tax scales in case of relocation

These basic principles are an introduction and are not exhaustive. Many exceptions exist and laws change regularly. This introduction does not replace specialised advice from a tax expert and/or a request for information from the competent tax authorities. No liability arises from this introduction.