Imputed Rental Value: Definition
The rental value in Switzerland applies to property owners, who live in said property. The imputed rental value corresponds to the amount of money the owner if they rented out the property.
This raises the question of how imputed rental value can be considered as an income, and taxed as such, when it is not actually a tangible amount. The law considers that the act of living in a property that you own is considered to be more economically beneficial compared to a tenant who has to pay rent every month.
In short, this value puts tenants and landlords on an equal footing.
Tax Deductions and Taxation
The imputed rental value is nevertheless advantageous for owners who declare it. In fact, if the imputed rental value is not declared, an owner will not be able to benefit from certain tax deductions linked to the purchasing and maintenance of a house, such as :
- Mortgage interest
- Maintenance and/or repair costs
- Energy improvement costs
The tax deductions to which an owner is entitled depends, of course, on the canton and a number of other factors. What's more, in Switzerland, imputed rental value is taxable in the same way as other income.
Calculating the Imputed Rental Value
As we have already seen, the imputed rental value generally corresponds to the amount of rent that an owner would receive if the property were rented out. This value is calculated by estimating the amount of rent that a potential tenant would have to pay.
In general, it is assumed that the imputed rental value is at least 60% and at most 70% (depending on the canton) of the amount that could be collected if the current market were taken into account. This also applies to second homes, even if they are not regularly occupied.
It is not a fixed amount. It depends on several factors factors such as :
- Property location
- Property condition
- Construction year
- The area
Sample Calculation
Let us say you own a 2-bedroom apartment in the canton of Valais, where the current market rental rate is around CHF 750. The annual rental price would therefore be CHF 9,000 (because 750 x 12).
If we start with the minimum taxable rental value (60%), we obtain CHF 5,400 (because 9,000 x 60%). Other deductions may be made depending on the condition of the property (how old it is for example).
Reforms concerning the Imputed Rental Value
Rental value in Switzerland has often been the subject of criticism. Many consider it unfair to be taxed on income that is not actually received. To improve the situation, the Federal Council has been in favor of a change in the laws concerning imputed rental value.
By 2021 and 2023, Switzerland was heading for a partial removal and even a total rescinding of imputed rental value, but in the end this was unsuccessful, and it still applies to all property owners.
Frequently Asked Questions
What is imputed rental value?
The rental value is a fictitious taxable income, corresponding to a minimum of 60% and a maximum of 70% of rent that an owner would receive if he rented out the property.
What kinds of tax deductions are available when I declare the imputed rental value?
You can benefit from deductions regarding property maintenance and acquisition (mortgage interest, maintenance and/or repair costs, energy improvement costs, etc.).
How do you calculate a property's imputed rental value?
To calculate the rental value of a property, we need to know the current market rental price and then calculate the annual amount, which we then divide by 60 to 70%, taking into account any deductions.
Is the Swiss imputed rental value system on its way out?
Despite several attempts at partial and complete abolition, imputed rental value is still applied to property owners.
