Imputed Rental Value Tax

The Imputed Rental Value Tax (German: Eigenmietwert) is a real estate tax under Swiss taxation that applies to property owners based on the imputed rental value of their property since the 1940s.

Description

As of 2024, this tax is levied in a limited number of relatively small countries: Switzerland, Iceland, Luxembourg, the Netherlands, and Slovenia. ^[1] It involves taxing the imputed income from owner-occupied (unrented) real estate as if it were rented. The taxed income is thus fictional, calculated based on the property's imputed rental value, treated as real income despite being hypothetical. ^[2] This tax is applied in all Swiss cantons. ^[2]

In return for the tax on this presumed rental income, property owners can claim deductions for maintenance costs and mortgage interest. ^[3]

The rationale for this tax is based on several principles:

• When an owner occupies large premises not entirely necessary for their needs, they withhold these premises from the rental market for personal comfort. In times of housing shortages, taxing unrented properties encourages owners to rent them out.
• The tax offsets the cost of maintaining the owner's residence.
• It increases the tax burden on wealthy property owners.
• It promotes professional mobility: if an owner must relocate and pay rent elsewhere, they can rent out their property and use the full rental income (without additional tax deductions) to cover their own rent, creating a form of tax neutrality for migrating owners. ^[1]
• It reduces tax evasion by owners tempted to underreport rental income, as they must pay the tax even without declaring rental activity.

History

The tax was introduced in Switzerland during World War I, later abolished, reintroduced in 1934 as a temporary measure, and made permanent in 1958. It has faced regular criticism from right-wing parties in the Swiss parliament, as well as from various taxpayer groups and landowners' associations. ^[4]

In 2018, the Commission for Economic Affairs and Taxation proposed abolishing the imputed rental value tax for owner-occupied residences, though it would remain for second homes. ^[5] In return, deductions for maintenance costs, energy-saving measures, and restoration of historical monuments would be eliminated, though cantons could retain some of these deductions. ^[3] In September 2021, the Council of States voted to abolish this tax. ^[6]

Role of the Imputed Rental Value Tax among property taxes

In addition to taxes on property transfers (sale, inheritance, donation), including the tax on real estate capital gains, three types of annual taxes affect property ownership: ^[7]

• Taxes proportional to the tax base: the land tax.
• Progressive taxes based on wealth: the wealth tax in some Swiss cantons, Norway, Spain, and the real estate wealth tax in France.
• Progressive taxes based on income, often called income tax: the imputed rental value tax falls into this category.

Swiss Referendums on the topic

• Popular Initiative "Home Ownership for All" on February 7, 1999 (41.3% yes, 58.7% no). ^[8]
• Tax Package on May 16, 2004 (65.9% no). ^[9]
• Popular Initiative "Home Ownership through Housing Savings" on June 17, 2012 (68.9% no). ^[10]
• Popular Initiative "Secure Housing in Retirement" on September 23, 2012 (52.6% no). ^[11]
• In June 2023, the Swiss National Council approved the abolition of the imputed rental value tax, with the trade-off that mortgage interest and maintenance costs would no longer be fully deductible. ^[12]

Criticism

As it taxes a theoretical income, this tax can particularly burden those with low incomes, such as retirees. ^[2] Determining the precise amount of this income is complex and challenging to implement. ^[2] The IMF and the OECD have raised concerns about Swiss household debt levels due to this tax, urging reform, particularly as total mortgage debt in 2024 exceeds 150% of Switzerland's CHF 800 billion GDP. ^[13] The Swiss system thus encourages borrowing rather than repayment. ^[13]

Compensation after potential abolition

If the imputed rental value tax is abolished, the property tax on second homes could increase to compensate. Maintenance costs would no longer be deductible, and passive interest would only be deductible up to 40% of taxable wealth income. ^[14]

Comparison

In Belgium, the imputed rental value tax is called Cadastral income. In France, the Cadastral rental value is the "theoretical annual rent a built or unbuilt property could generate if rented under normal conditions." It is used to calculate taxes benefiting local authorities: residence tax, Economic territorial contribution (replacing the former "business tax"), and land tax on built or unbuilt properties (e.g., agricultural operations). ^[15]

Imputed Rental Value Tax worldwide

As of 2024, this tax is levied in a limited number of relatively small countries: Switzerland, Iceland, Luxembourg, the Netherlands, and Slovenia. ^[1]

France

In France, it was introduced in 1914 and abolished in 1965 to encourage middle-class homeownership. ^[1]

See also

• Real estate law

References

1. de Guigné, Anne (February 15, 2024). "L'improbable retour de l'imposition des loyers fictifs" [The unlikely return of the taxation of imputed rents]. Le Figaro (in French). Retrieved October 4, 2025.
2. Oberson, Xavier (April 10, 2019). "La saga de l'imposition de la valeur locative" [The saga of the imputed rental value tax]. Bilan (in French) (7): 27.
3. Wuthrich, Bernard (January 18, 2019). "L'impôt sur la valeur locative vacille" [The imputed rental value tax is wavering]. Le Temps (in French). Retrieved October 4, 2025.
4. "La valeur locative en toute simplicité" [Imputed rental value made simple]. Raiffeisen.ch (in French). Retrieved October 4, 2025.
5. "Valeur locative abolie: les gagnants et les perdants" [Abolition of imputed rental value: winners and losers]. Le Matin (in French). August 22, 2018. Archived from the original on 22 August 2018. Retrieved October 4, 2025.
6. ATS (September 21, 2021). "Le Conseil des États accepte d'abolir la taxe sur la valeur locative" [Taxation of property owners – Council of States agrees to abolish imputed rental value tax]. Tribune de Genève . Retrieved October 4, 2025.
7. "Imposition des biens immobiliers en Suisse" [Taxation of real estate in Switzerland]. www.ch.ch (in French). September 12, 2019. Retrieved October 4, 2025.
8. "Volksabstimmung vom 7. Februar 1999" [Referendum of February 7, 1999]. Bundeskanzlei (in German). Retrieved October 4, 2025.
9. "Steuerpaket" [Tax Package]. Eidgenössisches Finanzdepartement (in German). Archived from the original on 29 November 1998. Retrieved October 4, 2025.
10. "Volksinitiative "Eigene vier Wände dank Bausparen" vom 17. Juni 2012" [Popular Initiative "Home Ownership through Housing Savings" of June 17, 2012]. Eidgenössisches Finanzdepartement (in German). Archived from the original on 29 November 1998. Retrieved October 4, 2025.
11. "Initiative "Sicheres Wohnen im Alter" vom 23. September 2012" [Popular Initiative "Secure Housing in Retirement" of September 23, 2012]. Eidgenössisches Finanzdepartement (in German). Archived from the original on 24 August 2018. Retrieved October 4, 2025.
12. "Le Conseil national accepte la suppression de la valeur locative" [National Council approves abolition of imputed rental value tax]. RTS (in French). June 14, 2023. Retrieved October 4, 2025.
13. Langlo, Jan (January 17, 2024). "La valeur locative a de beaux jours devant elle" [The imputed rental value tax has a bright future ahead]. Le journal de l'immobilier (in French) (106): 6.
14. Langlo, Jan (January 17, 2024). "La valeur locative a de beaux jours devant elle" [The imputed rental value tax has a bright future ahead]. Le journal de l'immobilier (in French) (106): 7.
15. Direction générale des finances publiques (2014). Brochure pratique impôts locaux 2014[Practical guide to local taxes 2014] (in French). Paris: Direction générale des finances publiques. p. 27.