Property Taxes in Vaud

Wealth tax on property (impôt sur la fortune)

In Switzerland, property is included in the owner's taxable wealth for the purposes of the cantonal and communal wealth tax (impôt sur la fortune). The taxable value of the property is the official assessed value (valeur fiscale), which is set by the cantonal tax authority and is typically 60 to 70 percent of the market value.

The wealth tax rate in Vaud varies depending on the owner's total taxable wealth and the commune of residence. For a property with a taxable value of CHF 1.2 million (representing a market value of approximately CHF 2 million), the annual wealth tax is typically CHF 2,000 to CHF 5,000 depending on the owner's overall wealth and tax situation.

Deemed rental income tax (valeur locative)

Switzerland applies a unique tax concept called the valeur locative (deemed rental income). Property owners who occupy their own property are deemed to receive a notional rental income — the amount they would receive if they rented the property to a third party. This notional income is added to the owner's taxable income and taxed at their marginal income tax rate.

The valeur locative is set by the cantonal tax authority at approximately 60 to 70 percent of the market rental value. For a CHF 2 million property in Montreux, the valeur locative is typically CHF 20,000 to CHF 35,000 per year. This is added to the owner's taxable income, which can result in a significant additional tax burden — particularly for high-income owners.

Mortgage interest deduction

The valeur locative system is partially offset by the deductibility of mortgage interest. Owners who have a mortgage can deduct the annual mortgage interest from their taxable income. For a CHF 1.2 million mortgage at 2 percent, the annual interest of CHF 24,000 can be deducted, partially offsetting the valeur locative.

Maintenance costs and PPE service charges are also partially deductible — owners can deduct either a flat-rate deduction (typically 10 to 20 percent of the valeur locative) or actual maintenance costs, whichever is higher. This deduction partially offsets the tax burden of the valeur locative.

Capital gains tax (impôt sur les gains immobiliers)

When a property is sold, the gain (difference between the sale price and the original purchase price, adjusted for acquisition costs and improvements) is subject to the cantonal capital gains tax (impôt sur les gains immobiliers). In Vaud, the capital gains tax rate decreases with the length of ownership — properties held for more than 25 years may be exempt from capital gains tax.

For properties held for less than 5 years, the capital gains tax rate in Vaud can be as high as 30 to 40 percent of the gain. For properties held for 10 to 15 years, the rate is typically 10 to 20 percent. Buyers who intend to sell within a few years should factor the capital gains tax into their investment calculations.

Key points

• Wealth tax: calculated on official assessed value (~60–70% of market value)
• Valeur locative: notional rental income added to taxable income — unique Swiss concept
• Mortgage interest deductible — partially offsets valeur locative
• Maintenance costs and PPE charges partially deductible
• Capital gains tax: decreases with holding period; up to 30–40% for short-term sales