Tax burden for property owners: Why setting up a corporation can be an efficient strategy

Tax burden for property owners: Why setting up a corporation can be an efficient strategy

According to a report by www.nzz.ch, private owners of real estate in Switzerland are being punished for tax purposes. This particularly affects pensioners who are confronted with high tax contributions, even if their property income is only low. An efficient strategy to avoid these tax disadvantages can be to transfer real estate to a stock corporation (AG). According to Claude Frosio, Head Tax Consulting at Bank Vontobel, setting up a real estate company can offer tax advantages, particularly in terms of lower profit tax rates and the possibility of making tax depreciations and provisions.

According to the article, setting up a real estate company can be particularly advantageous if someone has been working for many years and at the same time earns taxable income from real estate. With this solution, private investors avoid high tax progression, which can be up to 40% or more depending on the canton. The income within an AG is usually taxed at a much lower profit tax rate of around 12 to 19%, depending on the canton.

In addition, founding an AG offers very attractive design options, such as the possibility of deducting interest on debts and making tax depreciation and provisions. Profits generated can also be reinvested directly in the AG, meaning they are only partially taxed.

There are also specific situations in which setting up a corporation is particularly worthwhile, such as if someone owns real estate in a high-tax canton but lives in a low-tax location. In this case, establishing a real estate company can lead to significant tax advantages.

Overall, setting up a real estate company is an efficient strategy to reduce tax burdens and benefit from tax advantages in the long term.