tax on rental value of foreign property

Finance, Taxes, Banking, Insurance and Retirement
1
Hello,

I have property in my home country. If I understand correctly the potential rental income I have on this will be added to my income which I will be taxed on.

However, do I have to do this even if I live in this property? I have no ability to rent it out because I travel back and forth between Switzerland and my home country and when I'm there I live in the property

2
You still have to declare it and a part of the value of the house will be used to determine your wealth tax rate.

3
Only the wealth Commercial value of the property must be declared. This wealth will not be taxed but will be tallied to determine the wealth tax rate. Rental value is only taxed if you actually collect rent.

4
For what it's worth, I've been told otherwise by a tax consultant: every property must either generate real rent or the virtual rent (eigenmietwert) in the same way that Swiss property does.

OP: I believe that when you declare the foreign property value / rental value it will increase your wealth / income tax rate, but not increase the wealth / income taxable amount.

So you won't pay taxes on it, you will just pay slightly higher taxes on your Swiss assets / income, because you are a bit more rich w.r.t. that it seems from your Swiss income/assets

5
non swiss property value -> swiss wealth tax

non swiss rental property income -> local taxes i.e. tax domicile of the property is located

6
How will rental property value (which is basically virtual income) be taxes as wealth?

7
sorry if I wasnt clear. I have edited

the value of the property has to be declared in your swiss tax

any rental income you get from this property has to be taxed as income in the country where the property is located.

trust this is ok

8
I am pretty sure non-swiss property value does not get swiss wealth tax, it only increases the total tax rate but is not getting taxed. Same thing applies to non-swiss rental property income (even if virtual, in case no real rental income exists).

E.g. you own 1M CHF cash and 500k CHF abroad property; you earn 200k chf in Switzerland and your abroad property rental income is 50k.

You will be taxed:

- Wealth tax: rate of someone who owns 1.5M CHF applied to 1M CHF

- Income tax: rate of someone who earns 250k CHF applied to 200k CHF

9

Hm, no? We have property in the UK which we use when we go over and we still have to provide a theoretical rent figure for it for Swiss tax purposes, even though it’s empty when we’re not there. That theoretical rent is added as part of our income and as such gets taxed.

10
same for us

11
Speaking for my canton (Vaud) I can be very clear the rules are as follows.

- Fortune/Wealth tax; the value of the property is added to your total to define the rate you should pay, but is not taxed itself per se

- Income tax;

1)if you have a property that is available to you like a holiday home then the theoretical rental value must be added to your declaration

2)if you rent it out then the actual rental values must be declared (however you get credit for maintenance done and tax paid where the house is). Did this with for a number of years.

3)if you have a property that you do not rent BUT it is not available to you, it is not required to declare/pay theoretical rental value. To clarify with example of my own specific case, we have a small property that is used permanently by an aged relative who does not/cannot pay rent to us. This value is part of my "baseline wealth" but no real or theoretical rental value is required, this is re-declared every year and always accepted.

B

12
Shouldn't be the case. UK rental income itself would be taxed only in the UK.

It's *effectively* taxed in CH as already mentioned in other posts it increases the overall tax rate.

13
It just sounds so strange that the potential rental value is added when I have no ability to rent it out!

14
Same for the Swiss who live in their own home. They can deduct the mortgage interest, which also can be done for a property abroad.

15
You can see it this way: it's not like you have no ability to rent it out, you don't want to. You said you keep it empty because you use it when you go to the other country. You might though rent it out and then rent a place for when you visit your country - but that would cost money. So you are saving money on the potential rent of another property, so Switzerland taxes you for the fact that you don't rent your property.

Either way, unless we are talking about a really big one, I think the impact on taxes won't be very significant

16

The rental income will be taxed where the property is located but the value of it will be added to your worldwide income to determine the tax rate. So it will not increase taxable income but will increase your taxrate hence your taxes.

17
For me I think it worked out at like 30% of the rental income which I found significant.

18
Wow then I stand corrected. So just in virtue of increasing the tax rate you ended u paying something that is basically a ~ average Swiss marginal tax rate on that income?

19
Yes, I can live in a hotel instead, but why would I do that haha. Sounds insane. To "get taxed" on something that's not a real income, but a possible income, in general sounds totally insane. But it is what it is. Feels like you could argue that you should get taxed even if you are unemployed because you could be employed instead, you just chose not to work.

But if Swiss pay "possible rental income" taxes on their primary home that's also insane. Like yes, I can possibly rent out and live in a tent instead I guess

20
I have a house rented out in the UK.

For every tax return I have to put the rental income minus all costs including the mortgage (the net is not much so I doubt it adds much to my tax bill)

For the UK I got a note from inland revenue years ago that as the total income was below my allowance I didn't need to do anything.