What Qualifies As a Secondary Residence?
As its name suggests, a second home is distinguished from the main home, where a person spends the majority of his or her time.
In Switzerland, a second home is usually a place that you use for vacation.This means that you use it for occasional visits, and that it is located in a different municipality from your own.
Secondary Residence vs. Secondary Domicile
The second home differs from secondary domicile.In fact, these are two distinct types of housing. A secondary domicile is often used for business purposes. A secondary residence is subject to federal law LRS whereas a principal residence is not.
Under the LRS Act, a principal residence is any dwelling or premises occupied for a long period of time while art. 2 para. 4 defines a secondary residence as "any dwelling which is neither a principal residence nor a dwelling or premises assimilated to a principal residence."
Restrictions on Secondary Residences
The cantons are obliged to avoid too many second homes and to promote other types of accommodation, such as hotels or affordable housing for permanent residents.
In order to achieve this, Swiss municipalities must not exceed a threshold of 20% of second homes. Cantons are allowed to be stricter, if they so wish. In principle, dwellings used for accommodation tourist may be authorized.
Tax Considerations
In principle, the taxation of second homes in Switzerland is similar to that of principal residences. A second home must be included in your tax return, where it will be treated as an asset.
In all cases, there is no tax benefits when you own a second home, because it's seen as a privilege.
Rental Value
As with the main properties, the rental value is also valid for second homes. The rental value is considered fictitious income and is calculated on the profit that an owner could generate if he rented out the property in question.
If the owner of a second home rents out the property in question, he or she will have to pay part of the rental value. The canton of Berne is an exception, as only the highest rental value (that used for direct federal taxation) is also applied for cantonal taxation of second homes.
Property Gains Tax
As with the sale of a principal residence, when you decide to sell a second home, you will have to pay property gains tax if you make a profit (i.e. if the sale price is higher than the purchase price of the property).
If you've owned your second home for a long time, the tax on the property gain will be lower. If, on the other hand, you sell your property shortly after acquiring it, the tax will be much higher. You may also be required to pay a speculation surcharge.
- A speculation surcharge has been put in place to limit the rapid purchase and resale of property, thus stabilizing the real estate market.
How to Choose your Second Home?
There are several criteria to consider when buying a second home in Switzerland.
Financing
Make sure you have enough money not only to buy your second home, but also to maintain it over the years. In general, you won't be able to take out a loan for this type of property.
Location
As we saw earlier, Swiss municipalities have a quota of 20% maximum of second homes to be respected. So choose a location where buying a second home won't be restricted.
Other criteria will be more personal, such as the proximity of the home to various services and/or attractions. You should also bear this in mind in the case of a resale, since a more accessible and attractive location will be preferred by potential buyers.
Possible Renovations
Make sure the property you're interested in doesn't need renovation. If, however, you wish to buy a property that does require renovation, you are usually allowed to deduct the price of the work you got done from the property gains tax.
Buying for the long term
As explained above, selling a house or apartment quickly after purchase will cost you dearly. So it's important to choose your property carefully, so that you can keep it for as long as possible.
Frequently Asked Questions
What is a second home?
As the name suggests, a second home is a property that you use only occasionally, usually on vacation. In Switzerland, it must be located in a commune other than your principal place of residence.
What's the difference between a second home and a holiday home?
A secondary residence is a property used for occasional stays, whereas a second home is often linked to a professional activity. What's more, second homes are subject to the LRS federal law, which is not the case for principal residences.
What restrictions apply to second homes?
The cantons must limit the number of second homes and encourage the development of housing accessible to permanent residents. Swiss communes may not exceed a quota of 20% second homes, with exceptions for qualified tourist accommodation.
How is a second home taxed?
In principle, a second home is taxed in the same way as a principal residence. It must be declared as wealth and offers no special tax benefits.
What is rental value and how is it calculated?
The rental value represents a fictitious incomeestimated on the basis of the rent you could earn by renting the property. It is subject to income tax. In the canton of Berne, only the highest rental value is taken into account for cantonal tax purposes.
Do I have to pay tax if I sell my second home?
Yes, if you make a profit (sales price higher than purchase price), you must pay property gains tax. The longer you hold the property, the lower the tax.
