Property owned abroad: what Swiss taxpayers need to know

In Italy and other places outside Switzerland, banking secrecy is a shadow of what it once was Keystone

The automatic exchange of financial information between Swiss and foreign authorities is worrying many people in Switzerland who own property abroad. This is what they need to know.

When will the automatic exchange of information come into effect?

Switzerland has been collecting data to comply with new global rules on the automatic exchange of information since January 1, 2017. However, that information won’t actually be exchanged until after January 1 of next year.

Are real estate holdings affected by these new rules?

No, not officially, because the automatic exchange of information agreement only concerns bank accounts. However, it could be relatively easy for financial authorities to figure out whether someone owns real estate using bank account data.

Must real estate owned abroad also be declared to Swiss authorities?

Yes, but that’s nothing new. A taxpayer taxed in Switzerland must declare all assets, regardless if they are located in Switzerland or abroad.

Since my real estate is already taxed abroad, will I have to pay double by also declaring it in Switzerland?

No, especially not if there is a double taxation agreement in place between Switzerland and the foreign country where you own property. Swiss authorities will not collect real estate tax on the property owned abroad, but the tax rate on the share of wealth taxed in Switzerland will increase as a result.

For example, if someone declares assets worth CHF500,000 ($500,000) to Swiss tax authorities, that person will pay taxes based on the rate for that amount. If that person also declares property abroad with a value of CHF200,000, they will continue to be taxed only on the CHF500,000 but will pay the tax rate for the net worth of CHF700,000.

The same principle applies to the rental value of a property, generally between 2.5% and 5% of the total property value. The taxpayer will not pay direct taxes on that value but it will increase the person’s overall tax rate.

Will those who have not previously declared property owned abroad be punished?

No, not if the property owners willingly declare the property to authorities. In that case, they will simply have to pay any taxes not paid in the previous ten years.

However, the possibility to willingly declare property abroad without punishment is only available until June 30, 2018 when the automatic exchange of information agreement formally enters into force.

After that date, those who have not declared real estate assets abroad could be subject to hefty fines.  

Translated from French by Veronica DeVore