Taxes on real estate in Geneva

During Acquisition:

At the time of acquisition, a transfer tax, known in Geneva as registration duties, is payable by the buyer. It amounts to 3% of the acquisition value of the real estate, without deduction of any mortgage or unsecured debts. In addition to the transfer tax, there are also fees for the Land Registry (0.3%) and the notary, which vary according to a decreasing tariff.

During Ownership:

In terms of income tax, the owner is taxed on the rental value of the real estate they occupy or have reserved for their own use. This value is determined by the tax authorities based on a form that takes into account the following objective criteria: living area, type of housing, building layout, obsolescence, property location, and any surrounding nuisances. It corresponds (or is assumed to correspond) to the amount that the owner would have to pay to rent a property of similar nature, or the amount they could obtain by renting out the property to a third party.

The rental value generally cannot exceed 20% of the taxpayer's total gross income. Additionally, the taxpayer benefits from a cantonal and communal reduction of 4% of the rental value per year of ownership, up to a maximum of 40%.

The taxpayer can fully deduct from their taxable income the maintenance costs of the real estate as well as mortgage interest, but up to the limit of fortune income plus CHF 50,000.

In terms of wealth tax, the owner is taxed on the net tax value of their real estate, generally corresponding to its market value, minus mortgage and unsecured debts. At the cantonal and communal level, the taxpayer also benefits from a 4% reduction per year of ownership, up to a maximum of 40%.

Furthermore, throughout the ownership period, an additional real estate tax is levied by the Canton of Geneva. It is calculated on the tax value of the property at a rate of 0.1%. It does not take into account the 4% reduction or debts burdening the property. It is payable by any owner or usufructuary of real estate located in the Canton as of December 31st.

During Sale:

At the federal level, gains generated from the sale of real estate held in private wealth are exempt from tax. However, Cantons are free to impose taxes on them. Geneva imposes a tax on capital gains, called the real estate profit tax. No additional tax is levied at the communal level.

This tax is due by the seller or the recipient of the gain, even if they are domiciled outside the Canton of Geneva or abroad. It is calculated on the difference between the selling price and the acquisition value of the property, i.e., the purchase price plus expenses that include acquisition costs and expenses incurred by the owner that have increased the value of the property (value-added works). Maintenance costs are not deductible.

The tax rate is progressively reduced based on the duration of property ownership to discourage real estate speculation. Thus, it is:

50% if the property has been held for less than 2 years; 40% if held for at least 2 years but less than 4 years; 30% if held for at least 4 years but less than 6 years; 20% if held for at least 6 years but less than 8 years; 15% if held for at least 8 years but less than 10 years; 10% if held for at least 10 years but less than 25 years; 0% if held for 25 years or more. If the owner incurs a loss on the sale of their property, they cannot claim any corresponding deduction.

The real estate profit tax collected can be partially or fully refunded if the realized gain comes from the sale of a property occupied permanently and exclusively by the taxpayer, and it is reinvested within 5 years in the acquisition or transformation of a property in Switzerland of the same nature (reuse of the gain). However, the refund is limited to the profit actually reinvested plus the amount of the acquisition value of the alienated property. Also, for the reinvestment of the gain to be allowed, the purchase price of the new real estate must exceed the acquisition value of the alienated property.

Reuse of real estate gain can also be allowed when the purchase or construction of the replacement real estate occurs before the sale of the first property (early reuse). To benefit from this, the seller must also prove that the first real estate has been listed for sale before the purchase of the second. Moreover, the sale of the first real estate must occur within a reasonable period after the acquisition or construction of the second. In practice, the tax authorities allow a period of 18 months between the two operations.

If the transfer of real estate occurs due to death or donation, the real estate gain tax is not levied. It will be levied in case of subsequent sale by the heir or the donee. For tax calculation purposes, the purchase price paid by the deceased or the donor and the ownership duration from the acquisition by them until the day of sale by the heir or the donee are determinative. However, gift and inheritance taxes are still due on the fair market value of the property at the time of transfer.

Legislative Changes:

A comprehensive reform of Geneva's real estate taxation is currently underway. It not only concerns registration duties, which are expected to be abolished, but also the real estate profit tax. According to the draft law, a progressive scale based on the capital gain realized upon sale could be introduced, and taxation may still apply even after ownership of more than 25 years. New rules for the tax assessment of real estate are also expected to be introduced. Stay tuned...