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Tax legislation
The taxes on capital gains on properties are defined in Cantonal tax legislation in accordance with different methods and scales. Profits on property are subject to tax in all Cantons.
Taxes are payable at the location of the building. The seller is the debtor. In principle, it is the person who is registered in the land register as owner or who has the power to dispose economically of real estate, for example, a building or a co-ownership.
The object may be a building, a share of co-ownership or a separate and permanent right registered in the land register (for example a right of source).
The building right is also a separate and permanent right. In Geneva, building right concessions, paid in single capital or through periodic annuities, are subject to income tax.
Private persons (individuals)
Individuals pay special tax on profits on property which is due at the moment when the profit is obtained in the Canton of Geneva. This is a Cantonal tax.
Professionals and legal entities
In certain Cantons (e.g. Zurich, Berne, though not Geneva), capital gains on property accruing to legal entities (e.g. a Limited Compagny) are also subject to a special tax. This is the monist system .
In other Cantons (e.g. Vaud, Argovie, Lucerne), capital gains on property accruing to legal entities are subject to tax as profits. This is the dualist system.
In Geneva, capital gains on property accruing to legal entities or property professionals (property developers, architects, managers, etc.) are subject to tax as income or profits at the Cantonal and Federal levels. The normal rate of taxation is applicable and a self-employed person must also pay OASI/DI on the profit. The capital gain on property is first declared for the purposes of the special tax on capital gains on property, and then declared for the purposes of tax on professional profits. The special tax on property gains is then deducted from the tax on profits.
Nevertheless, a property professional who sells his private villa is subject to tax on the same level as a private person, and a private person who founds a simple compagny with professionals in order to engage in property development will also be subject to tax in the same way as a professional.
Individuals in this situation are often surprised when they learn that they still have to pay the premiums for old-age and survivors insurance (OASI) and disability insurance.
The acquisition value
The acquisition value corresponds to the acquisition price plus acquisition costs (notary fees, registration fees)
You bought your villa or apartment more than 10 years ago
The acquisition value corresponds to the tax estimate of the building 10 years ago, increased by 30 %.
You bought a rental property more than 10 years ago
The acquisition value corresponds to the tax value 5 years before the disposal, without any increase
You received the property by donation
The acquisition value corresponds to the price on the date of acquisition by the donor
You inherited the property and the deceased died before the 1st of January 2001
The acquisition value corresponds to the value of the property at the date of death
You inherited the property and the deceased died on the 1st of January 2001 or later
The acquisition value corresponds to the date when the deceased purchased the property
The disposal value
It is the selling price, less the capital gains work, less the selling costs (brokerage commission of real estate broker)
The duration of ownership
You received the property by donation
The duration corresponds to the number of years during which the donor has ownded the property.
You inherited the property and the deceased died before the 1st of January 2001
The duration corresponds to the number of years since the death
You inherited the property and the deceases died the 1st of January 2001 or later
The duration corresponds to the number of years during which the deceases was the owner
The tax scale
In the Canton of Geneva, and most Cantons, the rate of tax is graded in relation to period of ownership. In Geneva, the tax rate is graded between 50 % (ownership of less than 2 years) and 0 % (ownership of 25 years and more).
Tax scale:
Less than 2 years: 50 %
At least 2 years: 40 %
At least 4 years: 30 %
At least 6 years: 20 %
At least 8 years: 15 %
At least 10 years: 10 %
At least 25 years: 0 %
Calculation of the real estate profit
In Geneva, the property gain subject to tax consists to the difference between the disposal value and the acquisiton value. Brokerage commissions and certain expenses may be deducted from the profit.
Tax = (disposal value - acquisition value) x tax scale
Reinvestment
In some cases, if the owner occupies his own villa or flat and he sells his property and he reinvests the profits to purchase a new home he lives himself, he can ask the tax authorities that the tax benefit is deferred (reinvestment). The acquisition of the new home must be within a minimum period of 5 years and the reimbursed tax wil be payable when the replacement property will be sold.It is therfore not a tax exemption.
© Esther Lauber, Real Estate Trustee with Advanced Federal Diploma of Professional Education and Training, real estate broker
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