Raiffeisen analyses abolition of imputed rental value
According to an analysis by Raiffeisen, the abolition of the imputed rental value will benefit homeowners. The construction industry, on the other hand, would have to expect lower sales. Once the federal parliament has given its approval, the people will be asked to vote on the system change in the course of the year.
Raiffeisen has analysed the planned abolition of the taxation of imputed rental value for owner-occupied residential property. In the winter session in December, the Federal Parliament decided to change the system of home ownership taxation. Now the people have the final say at the ballot box, according to a press release from Switzerland’s second-largest banking group.
If the proposal is accepted, homeowners would realise considerable tax savings in some cases, depending on the type of household, given the prevailing low interest rates. The housing cost advantage of home ownership over renting is growing steadily and could rise to up to 30 per cent over the course of the year.
If the imputed rental value were to be abolished, home ownership would become noticeably more financially attractive overall in the current market environment and consequently also increase in value, according to Raiffeisen. However, homes in need of renovation are likely to lose value due to the elimination of deferred tax deductions as a result of the reform.
“One of the potential losers of the reform is the construction industry. Although it is likely to benefit from many last-minute orders in the short term during the transitional phase until the reform comes into force, in the long term fewer funds will flow into the renovation of residential buildings due to the elimination of a large proportion of tax maintenance deductions,” Fredy Hasenmaile, Chief Economist at Raiffeisen Switzerland, is quoted as saying.
If the prevailing interest rate environment remains unchanged, the tax authorities would also have to reckon with billions in lower revenues for years to come as a result of the reform.