Deemed rental value in Switzerland: what changes with the 2025 reform

"Deemed rental value": what is it and how is it calculated

In Switzerland, homeowners are required to declare as income the so-called deemed rental value; that is the theoretical rent they would receive if they rented out their property instead of living in it. This imputed value aims to ensure fair treatment between tenants (who pay rent) and homeowners (who benefit economically from living in their own property).[1]

The deemed rental value is set based on market prices in the area, though it does not necessarily correspond exactly to the actual market rent. The tax authorities apply standard criteria and formulas to simplify the process, which can nevertheless result in discrepancies between similar cases.

Legal and jurisprudential framework

The Swiss popular vote of 28 September 2025 approved the abolition of the deemed rental value, fundamentally changing the taxation of owner-occupied properties, with fiscal implications in both Graubünden and Ticino. This reform eliminates the imputed income associated with homeownership, significantly affecting real estate investment strategies and local tax policies, particularly in tourism-intensive regions.

The abolition of the deemed rental value will enter into force no earlier than 1 January 2028, as confirmed by the Federal Council. Until then, the current system remains in place, and the implementing details of the reform will be defined over the coming years. This major change requires current and future property owners to adopt proactive strategies to manage the transition effectively.

Context and implementation: before and after the reform

Before the reform, the deemed rental value set by cantons and municipalities was generally calculated at 60% of the market rental value, while for federal taxes, it tended to reflect around 70% of that value. This approach ensured compliance with the principle of equality between tenants and homeowners.[2]

Swiss tax law also provided several deduction opportunities for property owners.[3] Expenses for maintenance and repairs were deductible, as were insurance premiums related to the property and costs for third-party administration. Investments aimed at energy savings and environmental upgrades were treated as maintenance expenses and therefore deductible. Even demolition costs related to the reconstruction of a property could be deducted. If such costs were not fully used in the current tax year, they could be carried forward for up to two years. Furthermore, an alternative flat-rate deduction was available in place of actual expenses.[4] As for passive interest on private debt, it was deductible only up to an amount equal to the taxable investment income, with an additional allowance of CHF 50,000.[5] Before the recent tax reform, investors and property owners in Switzerland had a clear incentive to maintain a certain level of indebtedness, as mortgage interest was deductible from taxable income, providing a significant tax advantage.

The abolition of the deemed rental value eliminates taxation on imputed income but also removes the possibility of making the above deductions, particularly the deduction of passive interest and maintenance expenses for such primary residences.

However, under the reform, cantons may introduce a special property tax on self-used secondary residences (such as holiday homes). This new tax is primarily intended to offset the lost revenue in high-tourism regions that was previously generated through the taxation of the deemed rental value. Nonetheless, the details of this new tax remain uncertain and not yet clearly defined. The Conference of Alpine Cantonal Governments (CGCA) is taking a cautious approach. Secretary General Fadri Ramming has noted that “conditions vary in some cases between individual cantons, which is why coordination still needs to be analysed.”[6]

It is essential to stay informed through communications from both federal and cantonal authorities regarding the exact date the reform will come into force, the implementing provisions, and the new tax on secondary residences. The authorities will release crucial information that could affect property owners’ tax and real estate decisions.

Strategic planning is essential. Regular consultation with a tax advisor can help identify the necessary adjustments to your property portfolio and personal finances. During this transitional period, it is important to maintain accurate documentation of all expenses and tax deductions. This not only helps maximise the efficiency of your current tax return but also prepares you for upcoming changes.

If you have any questions or need further information, please contact attorney Michele Micheli (Partner, michele.micheli@nist-law.ch). You can also reach us at +41818510910 or via e-mail at info@nist-law.ch. We will be happy to assist you.

[1] STF 24.484/2005 of 30 March 2006, consid. 3.1

[2] DTF 124 I 145 consid. 4d and 5a; 123 II 9 consid. 4b; 124 I 145 consid. 4d

[3] Art. 32 of the Federal Direct Tax Act (LIFD); Art. 9 of the Act on the Harmonization of Direct Taxes of Cantons and Municipalities (LAID)

[4] Art. 32 paras. 2–4 and 2bis LIFD; Art. 9 paras. 3 and 3bis LAID

[5] Art. 33 para. 1 lit. a LIFD and Art. 9 para. 3 lit. a LAID; see also STF 2A_123/2006 of […] consid. 2.1

[6] swissinfo.ch, “Alpine Cantons: Still Little Clarity on Second-Home Tax,” 29 September 2025, https://www.swissinfo.ch/ita/cantoni-alpini,-ancora-poca-chiarezza-su-tassa-seconde-case/90085993, accessed 12 October 2025