What is the imputed rental value?
The imputed rental value is a fictitious income that owners of owner-occupied properties in Switzerland must pay tax on. It is based on the assumption that living in your own house or apartment provides an economic benefit – namely the saving of rental costs. This saving is treated for tax purposes as additional income and thus increases taxable income.
The idea behind this regulation comes from the principle of tax equality: while tenants cannot derive any tax benefits from their tenancy, owners may, for example, deduct mortgage interest or maintenance costs for tax purposes. The imputed rental value was introduced to offset these advantages.
For many property owners – especially those with low debt or fully paid-off properties – this regulation represents a burden. They have to pay tax on income they never actually receive. This very fact has shaped the political debate on abolishing the imputed rental value for years.
How does taxation of the imputed rental value work?
The imputed rental value is set by the cantonal tax authorities and is based on the estimated rental value of the property in question. In practice, the imputed rental value usually corresponds to around 60 to 70 percent of the local market rent, i.e. the amount that a comparable property would generate under an actual rental. Depending on the canton and type of property, this percentage may vary.
For companies or institutional owners that use a property wholly or partly themselves, the imputed rental value means an additional tax burden. It is added to taxable income, regardless of whether the property is used privately or for business – the decisive factor is that no rental income is generated.
Tax-deductible items can at least partially offset this burden. These include:
- Mortgage interest: Interest on existing mortgages can be deducted from taxable income.
- Maintenance costs: Value-preserving investments such as repairs, upkeep or replacement of technical systems (e.g. heating systems) are deductible.
- Lump-sum deduction: In many cantons, it is possible to claim a lump sum – usually 10 to 20 percent of the imputed rental value – instead of the actual maintenance costs.
In practice, the imputed rental value is often higher than the sum of these deductions, especially in times of low mortgage interest rates or for fully amortized properties. For many companies with operationally used properties, this can lead to a noticeable additional burden – both in income and wealth tax. This applies all the more when risks such as over-indebtedness and capital loss loom due to a lack of deduction options or rising financing costs.
Criticism of the imputed rental value and political developments
The imputed rental value has been controversial for decades. Critics complain that property owners have to pay tax on income they never actually receive. Especially in low-interest phases, when mortgage interest – and thus tax-deductible interest on debt – is low, the system leads to a noticeable additional burden, particularly for owners with paid-off residential property. For companies with owner-occupied properties, this often results in a disadvantage compared to rental solutions.
At the same time, the calculation of the imputed rental value is criticized as non-transparent and inconsistent. The assessment is made at cantonal level, which can lead to considerable differences depending on location, valuation method and the timeliness of the calculation. In addition, the imputed rental value is sometimes not adjusted for years – which can result in both over- and under-taxation.
Proponents of the regulation argue that the imputed rental value ensures tax equality between tenants and owners. While tenants pay their housing costs themselves, owners benefit from tax-deductible costs – such as mortgage interest, maintenance or renovations. Taxation of the imputed rental value is intended to offset this advantage.
The political debate about abolition is not new: the first initiatives were submitted back in the 1990s. A petition with over 145,000 signatures again called for the imputed rental value to be abolished in 2016. This was followed by years of political deliberations in the National Council and Council of States, which finally culminated in the 2024 reform package.
Current reform to abolish the imputed rental value
In December 2024, the National Council and the Council of States adopted a comprehensive reform to abolish the imputed rental value. The key points:
Abolition of the imputed rental value
- The imputed rental value will be abolished for owner-occupied primary and secondary residences. Properties used for one’s own residential purposes will no longer be taxed as fictitious income in future.
Restrictions on deductions
- Maintenance costs (including energy-saving, environmental and historic preservation costs) will in future no longer be deductible at federal or cantonal level for owner-occupied buildings. Energy costs and demolition measures will only remain deductible if allowed by the canton (in some cases only up to 2050).
- Interest on debt: Private interest on owner-occupied residential property will no longer be deductible – with the exception of first-time buyers: married couples may claim up to CHF 10,000 in the first year, other taxpayers CHF 5,000. These amounts decrease annually by CHF 1,000 (couples) or CHF 500 (individuals) over a period of ten years.
Special provision for first-time buyers
- A new, temporary transitional rule will apply to first-time buyers of owner-occupied residential property: they will receive a limited interest deduction for ten years, which decreases linearly over time.
This reform is part of a system change, combined with a property tax on secondary residences. Full implementation depends on whether the corresponding federal decisions are approved by the electorate on 28 September 2025.
Vote on 28 September 2025
On 28 September 2025, the Swiss population will vote on two closely interlinked proposals:
- Federal Act on the Abolition of the Imputed Rental Value
- Constitutional amendment introducing a property tax on secondary residences
Linking of both proposals
The reform can only come into force if both proposals are approved. The property tax on secondary residences is essential for many cantons, especially mountain and holiday regions, to offset potential tax losses. Rejection of the property tax would therefore undermine implementation of the abolition of the imputed rental value.
Significance of a “No” vote
A No vote in the referendum will automatically mean that the imputed rental value will not be abolished. The reform is legally linked, which means that the status quo will continue – despite parliamentary approval. In addition, a referendum can be called against both proposals.
Political positions and forecasts
- Support mainly comes from homeowners’ associations (e.g. HEV Switzerland) and organisations focused on property investments. They promise relief, investment incentives and more equitable tax conditions, especially for companies with owner-occupied properties.
- Scepticism and opposition comes from cantons with many secondary residences – they fear loss of revenue. Financial associations and tax experts also express concerns about the impact on deductions for maintenance and interest on debt, particularly for properties in need of renovation.
Initial surveys indicate narrow approval. The referendum in autumn 2025 could therefore pave the way for a far-reaching reform of the taxation of residential property. Other tax reforms such as the coordination deduction 2025 also show that companies should familiarise themselves with the new legal framework at an early stage.
Impact on companies
The abolition of the imputed rental value will also have a noticeable impact on companies with owner-occupied or mixed-use properties. Although the reform is primarily aimed at private owners, companies may also be affected depending on the structure and use of the property – in particular in the areas of property management, construction, architecture, fiduciary services and for businesses holding properties as fixed assets.
Tax implications for owner-occupied commercial properties
Companies that use a property wholly or partly themselves (e.g. as an office, practice or retail space) benefit indirectly from the abolition of the imputed rental value – but only if they are taxable as natural persons or partnerships. For legal entities, the imputed rental value does not apply anyway, as they already pay tax on actual income as part of corporate income tax.
If a property is used for mixed purposes (e.g. ground floor commercial, upper floor residential), the new rules can, however, lead to a more complex separation of private and business use. Clear demarcation will become even more important in practice, as deductions will in future only be possible for the rented or commercially used portion. Depending on the usage concept, VAT may also become relevant – for example in the case of conversions, rentals or mixed use by the company itself.
Restrictions on financing strategies
The planned restriction on the deduction of interest on debt will also affect strategic financing. The deduction for interest on debt will remain in place as long as the debt is linked to rented or commercially used properties. For purely owner-occupied residential property, however, this advantage will disappear – which may mean a significant additional tax burden for entrepreneurs with properties in their private assets. Other sources of income such as the withholding tax on investment income should also be taken into account in overall tax planning – especially for properties held as business assets.
Need for action for companies
Companies that hold or manage property shares should review the following points:
- Usage structure of their properties
- Deductibility of interest on debt in each individual case
- Separation between private and business share in the case of mixed use
- Tax optimisation through restructuring, particularly for partnerships owning property
Close coordination with tax advisors is recommended during the transition phase in order to avoid tax disadvantages and to make targeted use of opportunities.
Assessment from today’s perspective
With the decisions of the National Council and the Council of States and the forthcoming referendum in September 2025, Switzerland is facing a possible system change in the taxation of residential property. The abolition of the imputed rental value – a perennial issue in Swiss politics for decades – is now closer than ever.
For companies, the reform entails a number of tax and balance sheet changes, particularly for owner-occupied or mixed-use properties. The planned restrictions on interest on debt and maintenance deductions will change existing planning parameters – while at the same time the new rules open up potential for strategic adjustments in dealing with property assets.
The decision of the Swiss electorate in autumn will be of fiscal and financial importance not only for private owners but also for many companies. Early analysis of existing structures and close cooperation with tax experts are key steps in preparing for different scenarios. In addition, creating provisions and hidden reserves can be a tax-efficient strategy to smooth transitional burdens.