The end of the imputed rental value: what it really means for homeowners

A tax reform that shakes up the balance.

The result of the vote took many by surprise. By granting cantons the right to levy a property tax on secondary residences, Swiss voters have, perhaps unknowingly, paved the way for the abolition of the valeur locative, a unique European tax on a notional income.

Scheduled for 2028, this reform will profoundly reshape housing taxation by also removing the related deductions, such as those for mortgage interest or renovation costs. While many welcome this simplification, the implications are multiple and sometimes unexpected.

Insights from José-Carlos Torrecillas

In an interview with Le Ô magazine, José-Carlos Torrecillas, Wealth Solutions Specialist at Piguet Galland, shared his analysis of the concrete consequences of this reform.

“There is no universal truth. Some homeowners, particularly retirees or those with low debt levels, will benefit from a tax reduction. Conversely, those who recently purchased a property with limited equity could be exposed if interest rates rise or their income falls.”

In other words, individual circumstances matter more than general categories: the end of the imputed rental value will not automatically benefit all homeowners.

Anticipate to adapt better

Although implementation is planned for 2028, the time to prepare is now.

According to José-Carlos Torrecillas, several areas deserve special attention:

• Plan renovation works before deductions disappear, as prices may rise;

• Optimise financing structure, combining, where appropriate, a 2nd pillar buyback, 3rd pillar savings and diversified investments;

• Maintain a balanced approach: as long as debt costs remain low, investing may be wiser than repaying.

Impacts beyond homeowners

This reform will not affect homeowners alone.

The abolition of interest deductions on private loans will also impact tenants and, more broadly, indebted taxpayers.

A side effect that has received little attention but is very real  and one that will affect the purchasing power of part of the population.

What comes next?

The estimated cost of this reform, around CHF 1.8 billion, will need to be offset.

New taxes or levies could emerge, notably on pension capital from the 2nd and 3rd pillars.

For the construction sector, the end of renovation deductions may also slow down certain projects or encourage the use of foreign contractors.

A turning point to turn into an opportunity

The abolition of the valeur locative puts an end to a tax often deemed unfair, but it also calls for more refined and proactive wealth planning.

For José-Carlos Torrecillas, the key lies in adapting one’s overall financing, investment, and pension strategy to this new fiscal framework.

“This reform can be seen either as a constraint or as an opportunity. At Piguet Galland, our role is to help clients turn it into a lever for wealth optimisation, in line with their long-term goals.”

Link to the full article (in French only)