In Switzerland, those who own the home they live in must add imputed rent to their income when calculating their income tax. This means owner-occupiers are taxed for living in their own homes, an odd concept for some who are new to Switzerland.
In addition to paying tax on imputed rent, home owner-occupiers can deduct maintenance and mortgage interest costs from their taxable income. For many the overall income-tax effect of home ownership is positive.
Imputed rent can be seen as a way of evening up the balance between home owners and home renters. If someone chooses to invest in something which pays interest or dividends rather than in a home, and rent instead, why should they suffer tax on their returns while the home owner doesn’t? – the home owner’s return is a place to live.
Another simpler way to solve the tax imbalance between renting and owning would be to make rent a tax deductible expense.
Over the years, there have been numerous attempts to do away with imputed rent. Most recently, a motion put forward by Hans Egloff (SVP/UDC), called for a system allowing home owners to choose between the current system of imputed rent, with interest and maintenance tax deductions, or nothing. Egloff, who is also president of the Swiss home owners association (Website for German-speaking region), managed to get parliament to vote in favour of his plan in 2014 – 93 votes to 90.
Martin Schmid (PLR/FDP) reckons giving owners a choice would be very complicated and lead to considerable bureaucracy, while Brigitte Häberli (PDC/CVP) thinks it would ensure property can be passed to future generations.
In the end Hans Egloff’s proposal was shot down last week by the Council of States (upper house) by 27 votes to 16.
Christian Levrat (PS/SP), a member of the Swiss association of renters, said it is important to find a financially viable solution that ensures equal treatment of renters and owners, adding, that home-owner advocates have been stubbornly pushing this plan for 20 years without success.
The commission of economic affair and taxation has recently voted unanimously to put forward a parliamentary initiative to change the system and expects to set out an outline of its plan at its next meeting.