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A view from Morcote

Step 5: Reality Check (assuming one does not work in Switzerland and have Swiss-related income)

Buying a property typically always costs more than you thought it was going to cost. That's why it's important to know what you can expect. Costs have been divided in taxation expenses, "one-off" acquisition costs and "running" costs. If you are buying a holiday home it is most likely an emotional decision and you will typically be driven by a strong desire to buy the property. A study conducted by the University of St. Gallen indicated that an average 2-bedroom apartment in an average touristical area in Switzerland will cost around CHF 24.000 per year. In case you buy a holiday home we suggest to carefully check the "location". Prices in some touristical areas can be subject to huge fluctuations and in times of economical crises it is the holiday homes in less attractive locations that are the first to go down in price.

To determine whether a vacation home is financially sustainable the UBS Immo News suggests to make a simple calculation: the sum of the costs for the main residence and the holiday home should not exceed one third of your gross income.

The Tax Convention Permit

Although this is by no means a tax consulting site we did want to highlight this tax" opportunity" to you. The Tax Convention Residence Permit is reserved for wealthy people, who intend to move to Switzerland to live, not work. You must have a declared net capital of at least one million Swiss francs and an annual income of at least 150'000,- Swiss franc and be willing to spend a substantial part of the year (180 days) in Switzerland. The advantage of this unique permit is that you pay a fixed fee as income tax that is minor and not in proportion to your actual income and in any case much lower than the rates applied in other European countries.

Net-Worth Taxation

The net-worth tax is levied by the cantons and municipalities on the fair market value of total assets. In computing the value for net-worth taxation purposes, taxpayers may deduct from the total market valuation of their taxable assets:

  1. Mortgages and other liabilities
  2. The generally allowed tax-exempt amount (in Ticino up to CHF 200.000)

The net-worth tax rates are progressive. In 2003 they ranged in Ticino from approximately 0,18% (for net-worth up to CHF 200.000) to 0,54% (for net-worth up to CHF 5.000.000) for married couples living together. If you are foreign, given this net-worth tax and the low interest rates on mortgages, it may be advantageous to maximize the mortgage on a property. For further information please visit Swissnetwork.

Income Taxes

For an overview on the total effective percent rate for federal, cantonal and municipal income taxes please visit Swissnetwork.

Rateable Value

The Rateable Value is the 'rental value' of a house set by the local authority for the purpose of determining and allocating (tax) rates. This rental value is also added to the homeowners taxable income, even if a homeowner does not actually occupy the premises. The Rateable Value in Ticino is approximately 6.5% of property's value. Interest paid on the mortgage is deductible from the Rateable Value.

Yearly Expenses
Monthly Costs

Here is an overview of typical monthly costs, actual costs will vary depending on the property and your personal preferences:

Note: To get a Swisscom account you will need to make a deposit of typically CHF 1.000,-

Besides the above you will also need funds to cover cleaning, gardening and maintenance/repair expenses.