Tax dispute: What you need to know about removing imputed rental value

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What is the estimated rental value?

The estimated rental value corresponds to the rent that property owners could receive if they did not live in their property. You must tax this amount as income

Why is there no progress on removing imputed rent?

Because Parliament disagrees: there are various options being discussed. Previous decisions of the two houses of parliament, namely the National Council and the Council of States, disagree. This is why the bill is going back and forth between the two chambers. Even if an agreement is reached, a referendum may be held against it. A referendum would be held later. This will again take some time.

The alleged rental value will either be removed or not; What’s so complicated about it?

Because political views are very different and the devil is in the details. If the imputed rental value is removed, the relevant deductions will therefore need to be eliminated as well. What is particularly controversial is whether the debt interest deduction should be abolished or reduced. In other words, the opportunity to deduct the mortgage interest paid from your income and therefore reduce the tax burden.

What is being talked about in favor of abolition and against what?

The central fundamental principle of tax justice is that the tax burden corresponds to economic performance. So those who have more money have to pay more taxes. Anyone who has debts should be able to deduct them from their assets; Otherwise it would be unfair. However, whether you can also deduct the interest on the debt, that is, the “price” of the debt, from your taxable income is a different question. It makes “tax sense” to allow deduction if you earn taxable income from debts: Anyone who buys property on debt, rents out flats and taxes this income should also be able to deduct necessary expenses, including these. Mortgage interest. The argument against lowering loan interest is that it encourages people to borrow as much as possible. From an economic perspective, it would make more sense to keep the debt as low as possible. By international comparison, Swiss households have above-average debt; The main reason for this is high mortgage loans and their tax deductibility.

Are there any other points of contention?

Yes. If the imputed rent is abolished, it is undisputed that the deduction for property maintenance such as renovations should also be abolished. However, it is not clear whether energy-saving investments (e.g. façade insulation or a heat pump instead of oil-fired heating) will still be allowed to be tax deducted. Here, the tax system and the political will to encourage such renewals conflict with each other. This also applies to conversion costs for listed homes: Homeowners can’t help but incur higher costs due to strict construction requirements. Also under discussion is a proposal that would allow first-time homebuyers to take a special deduction from their taxes for a limited period of time to meet the constitutional mandate to encourage homeownership. However, political views also differ on this issue.

Why do some cantons oppose the abolition of the comparable rental value?

It is debatable whether the equivalent rent should be abolished only for the main residence or for second residences. From the perspective of the tax system, only a general abolition makes sense. But the mountain cantons, where many holiday apartments are located, benefit greatly from tax revenue from imputed rental value and therefore want to reserve this for second homes. The Council of States, where mountain cantons are overrepresented, voted for this option once again here on Thursday. Since the National Council has already advocated the consistent option several times (there is no estimated rental value for either the first or second houses), there is still a gap and the work is not making any progress. Now it is the National Council’s turn again.

If there is no compromise in sight, why not just let the project die and leave things as they are?

Because the landlord lobby has been pushing this issue for years. And many people who own apartments and houses think it’s unfair to have to pay taxes on “income” that doesn’t actually exist.

If this isn’t fair, then why is there an imputed rental value?

In fact, from the perspective of the tax system, taxation of fictitious income is questionable. On the other hand, the imputed rental value creates a kind of equal treatment for tenants: they cannot deduct the rent from their taxes and are therefore worse off than homeowners. The attributed rental value creates a balance here.

Can you then apply a new deduction for rent?

The first will cause billions of dollars in tax losses, and the second will create new problems and injustices: Can someone who rents an apartment for 3,000 francs alone deduct the entire amount? Isn’t this unfair to a family of four living on a 1,500 franc flat?

So there is no solution whatsoever…

Yes, in principle: if not only the imputed rental value but also all relevant deductions (property maintenance and loan interest) were eliminated, the left and the tenants’ association would probably grudgingly agree. But homeowners want to save as much on downtime as possible.

Source :Blick