I own a second home in Valais. What are the tax implications?

When you reside outside Switzerland, purchasing a property in Valais means that you become a limited taxpayer there. In other words, you are required to pay income tax at the municipal, cantonal, and federal levels, as well as wealth tax at the municipal and cantonal levels. The municipality where the property is located will also levy a property tax of 0.1% of the property’s taxable value.

Income Tax

In Switzerland, we are familiar with the principle of rental value. This is a notional income associated with the residence you own. It corresponds to the rent you would have to pay to rent out the property in question if you were not the owner. The rental value is set by the municipality. In practice, it is often lower than the market value.

When you generate income from the rental of your property, the rental value is reduced pro rata to the number of days the property is rented. The rental value and the rental income form the basis for calculating taxable income.

Taxable income can be reduced by claiming the maintenance and use costs of the property. These deductions can be made based on a flat rate equivalent to 10% of income (rental value and rental income) if the date of construction or last major renovation of the property is less than 10 years ago, or 20% if it is more than 10 years ago. If this option is chosen, you are not required to provide supporting documents.

If the actual deductions exceed the flat rate, you can claim these deductions, provided you provide invoices or other supporting documentation. The most common deductions for maintenance and usage expenses are:

• Co-ownership fees
• Various renovations (painting, floor repairs, …)
• Fire insurance premiums

Passive Interest

All passive interest paid on all your debts incurred in Switzerland and abroad can be deducted, provided you file a global tax return. This interest will then be deducted from your income from real estate located in Valais, up to the amount of the gross assets located there. If you opt for the simplified tax return, only 10% of the interest on the debt relating to your second home can be deducted.

Wealth Tax

The municipality where the property is located sets the taxable value of your second home. In the case of a simplified tax return, the only deductions allowed on this amount are:

• 10% of the debt incurred on your second home (debt balance as of December 31 of the tax year in question)
• 10% of the social security deduction granted to each taxpayer, according to their family and personal circumstances

If you choose to file a global tax return, all debts in Switzerland and abroad will be deductible. The actual amount of the deduction in Valais will be calculated pro rata to the gross wealth located there, according to international tax apportionment rules.

Property Tax

Property tax levied by the municipality amounts to 0.1% of the property’s taxable value. It cannot be reduced.