Selling a property
Capital gains tax on property – what sellers should know
Who pays property gains tax? How is it calculated? How does it differ among the cantons? Comparis answers the most important questions.
26.11.2021
iStock / Tinnakorn Jorruang
Profits from property sales are subject to capital gains tax. Comparis explains who needs to pay this, how it is calculated, how it can be reduced and how much the cantons charge.
What is capital gains tax on property?
The net profit achieved through the sale of a property is subject to tax. This is because a property is continuously gaining value, hence the reference to capital gains.
Who needs to pay property gains tax?
The seller is required to pay the tax, the amount due being based on how much profit is made.
As well as the profit, the length of time you have owned the property also affects the capital gains tax due. The lower the profit and the longer you have owned the property, the lower the capital gains tax bill. As a rule, the amount of the property capital gains tax is secured by a lien in favour of the municipal authority. If a seller refuses to pay the capital gains tax, the municipality can enforce a legal lien on the property and demand that the property is sold. Buyers can take the following steps to protect themselves from this:
Ask the tax office in the new place of residence whether the capital gains tax has been paid.
Ask the seller to deposit the capital gains tax owed with the tax office or in a bank account.
Agree in a contract that the purchase price will only be paid after the capital gains tax is settled.
Agree in a contract that you will pay the property capital gains tax and that this amount will be deducted from the purchase price.
What types of property are subject to this tax?
According to Art. 655 of the Swiss Civil Code, the definition of property includes parcels of land and the buildings on them, mines, co-ownership shares in immovable property and distinct and permanent rights recorded in the land register. The latter include usufruct rights, building rights, rights of access to water sources, allocation of water rights and other easements.
How is capital gains tax on property calculated?
The taxable capital gain on a property is the difference between the selling price and the amount of money invested in the property.
To find out what counts as money invested, you need to consult the canton in which the property is located. The tax law for the canton of Zurich, for example, defines investment costs as follows:
The price originally paid for the property
Expenses for building work, conversion work, land improvements and other value-enhancing improvements or renovations of the property, after deduction of any insurance payments and contributions from the federal state, canton or municipality
Contributions for connecting the property to the road and public services or otherwise increasing the value of the plot
Estate agent commission for the purchase and sale, usually 2-3% of the purchase price plus VAT
Advertising costs when buying and selling
Fees for transferring ownership when buying and selling
Any early repayment charges paid
The capital gain on property is taxed progressively in virtually all cantons. This means that the higher gain, the higher the tax charged. The other factor used in the calculation is the length of ownership. This means that the longer a seller has owned a property, the larger the discount on property capital gains tax.
Note: some cantons cap this discount once a particular length of ownership has been reached. In the canton of Zurich, for instance, the discount stops increasing when the length of ownership reaches 20 years. What’s more, in many cantons, you may be charged extra for shorter periods of ownership, usually less than 5 years.
Illustration of capital gains tax on property
Illustration based on the canton of Zurich: a property owner sells a single-family detached house after 10 years, making a net profit of 100,000 francs.
| Original purchase price (and other investment costs, e.g. estate agent commission) | CHF 900,000 |
|---|---|
| Sale price achieved | CHF 1,000,000 |
| Profit from the sale | CHF 100,000 |
The canton of Zurich applies the following rates of tax:
| Property gain | Tax rate | Capital gains tax on property |
|---|---|---|
| The first CHF 4,000 | 10% | CHF 400 |
| The next CHF 6,000 | 15% | CHF 900 |
| The next CHF 8,000 | 20% | CHF 1,600 |
| The next CHF 12,000 | 25% | CHF 3,000 |
| The next CHF 20,000 | 30% | CHF 6,000 |
| The next CHF 50,000 | 35% | CHF 17,500 |
| Total profit CHF 100,000 | ||
| Capital gains tax on property | CHF 29,400 | |
| Minus 20% based on a 10-year ownership | CHF 23,520 (correct as at September 2021) |
Source: Zurich Tax Handbook (page in German only)
Capital gains tax on property is usually progressive. This means that if the property gain was 250,000 francs, the canton of Zurich would charge gross property capital gains tax of 71,520 francs (correct as at September 2021).
How can capital gains tax on property be reduced?
Sales costs such as the estate agent commission, usually 2-3% of the sale price achieved, can be deducted from the property gain. You can also deduct value-enhancing investments like the addition of a conservatory or lift.
If this is applied to the capital gains tax calculated above, the tax could be reduced as follows (WITHOUT value-enhancing investments):
| Original purchase price (and other investment costs, e.g. estate agent commission) | CHF 900,000 |
|---|---|
| Value-enhancing investments | CHF 0 |
| Sale price achieved | CHF 1,000,000 |
| Profit from the sale | CHF 100,000 |
| Deduction of estate agent commission (2.5% of the sale price) | CHF 25,000 |
| Net capital gains tax on property | CHF 16,520 (correct as at September 2021) |
If this is applied to the capital gains tax calculated above, the tax could be reduced as follows (WITH value-enhancing investments). The value-enhancing investments increase the sale price by 1%:
| Original purchase price (and other investment costs, e.g. estate agent commission) | CHF 900,000 |
|---|---|
| Value-enhancing investments | CHF 20,000 |
| Sale price achieved | CHF 1,010,000 |
| Profit from the sale | CHF 110,000 |
| Deduction of estate agent commission (2.5% of the sale price) | CHF 25,250 |
| Net capital gains tax on property | CHF 13,650 (correct as at September 2021) |
How much does capital gains tax on property vary among the cantons?
The amount of capital gains tax charged varies from canton to canton and sometimes also by municipal authority. The following table lists a selection of cantons. The calculations are based on a length of ownership of 10 years. No value-enhancing investments were made. The estate agent commission is 2.5% of the sale price. For the sake of simplicity, the purchase and sale prices are identical in all cantons.
| Canton | Purchase price | Sale price | Estate agent commission (2.5% of the sale price) | Capital gains tax on property |
|---|---|---|---|---|
| Aargau | CHF 900,000 | CHF 1,000,000 | CHF 25,000 | CHF 15,000 |
| Bern (city) | CHF 900,000 | CHF 1,000,000 | CHF 25,000 | CHF 15,136 |
| Lucerne | CHF 900,000 | CHF 1,000,000 | CHF 25,000 | CHF 12,159 |
| Solothurn (city) | CHF 900,000 | CHF 1,000,000 | CHF 25,000 | CHF 10,508 |
| St. Gallen | CHF 900,000 | CHF 1,000,000 | CHF 25,000 | CHF 16,817 |
| Thurgau | CHF 900,000 | CHF 1,000,000 | CHF 25,000 | CHF 24,000 |
| Zurich | CHF 900,000 | CHF 1,000,000 | CHF 25,000 | CHF 16,520 |
Source: comparis.ch (correct as at September 2021)
Tax-free property gains and further information
In most cantons, capital gains on property are tax-free up to a particular amount. The table below lists the tax-free property gains for each canton. More information about capital gains tax on property is available in the link to the canton’s website (in the language(s) of the canton only).
| Canton | Tax-free property gain |
|---|---|
| Aargau | < CHF 3,000 |
| Appenzell Ausserrhoden | < CHF 3,000 |
| Appenzell Innerrhoden | < CHF 4,000 |
| Basel-Landschaft | No tax-free amount |
| Basel-Stadt | < CHF 500 |
| Bern | < CHF 5,200 |
| Fribourg | < CHF 6,000 |
| Geneva | If the length of ownership is more than 25 years |
| Glarus | < CHF 5,000 |
| Graubünden | < CHF 4,400 |
| Jura | < CHF 4,000 |
| Lucerne | < CHF 13,000 |
| Neuchâtel | < CHF 100 |
| Nidwalden | < CHF 100 |
| Obwalden | < CHF 5,000 |
| Schaffhausen | < CHF 5,000 |
| Schwyz | < CHF 2,000 |
| Solothurn | < CHF 10,000 |
| St. Gallen | < CHF 2,500 |
| Ticino | < CHF 30 |
| Thurgau | < CHF 50 |
| Uri | < CHF 7,000 |
| Vaud | < CHF 5,000 |
| Valais | < CHF 100 |
| Zug | < CHF 5,000 |
| Zurich | < CHF 5,000 |
Can capital gains tax be deferred?
Capital gains tax on property can be deferred under the following conditions (list is not exhaustive):
The profit is reinvested within a defined period (set by the canton) in a replacement property in Switzerland that is the main residence of the owner (Art. 12(3)(e) of the Tax Harmonization Act). You should inform the current municipality of residence in writing of the planned reinvestment when you sell your property. The municipality will then not charge any capital gains tax, but will defer it temporarily.
The property changes ownership through inheritance, an advancement on inheritance or gifting (Art. 12(3)(a) of the Tax Harmonization Act).
There is a change of ownership between spouses under marital property law, or to settle either extraordinary maintenance contributions made by one spouse or divorce claims, provided both spouses agree (Art. 12(3)(b) of the Tax Harmonization Act).
What other taxes and fees do I have to pay when selling my home?
As well as property gains tax, there are other taxes and fees that will reduce the proceeds from the sale of your property. These include property transfer tax, notary fees and land registry fees. Find out more about taxes and fees on property sales.
