Investment property: Rent out privately or transfer to a company?

With the decision to abolish the imputed rental value, many owners are faced with new tax issues. Whilst owner-occupied residential property will see some relief, the tax burden for private landlords of their own investment properties may increase, depending on the situation. Rental income remains taxable as income. Maintenance costs for rented or leased properties are, in principle, still deductible. However, there are restrictions on investments in energy efficiency and environmental protection: at federal level, this deduction will no longer apply in future, although the cantons may continue to provide relief. The changes to the deduction for mortgage interest may have a much more noticeable impact. The higher the level of debt financing for a property and the smaller the proportion of let properties in the total assets, the greater the impact of the new rules may be: in such cases, the proportionally limited deduction for mortgage interest is very low. This means that a large proportion of the mortgage interest actually paid can no longer be deducted for tax purposes. This reduces the net return – particularly for properties where margins are already tight. Owners with little or no borrowed capital are largely unaffected by this issue.

Structural change in the rental housing market

Private landlords play an important role in the Swiss housing market. In 2024, around 43 per cent of rental properties were owned by private individuals. At the same time, their share has been declining since the early 2000s. Institutional investors and property companies are gaining in importance. Many private owners let out properties as a sideline or as part of their retirement planning. Margins are often limited. If tax disadvantages are now added to the mix, the question arises as to whether the current structure is still optimal.

What does transferring ownership to a company entail?

Transferring an investment property into a company is a frequently discussed option – but also a relatively complex step. This is because a property cannot simply be transferred from a private individual to a company. Even if, economically speaking, the same person is behind the company, legally they are two distinct entities. For tax purposes, the transfer is treated as a sale to a third party. As a rule, the property is contributed to the company at its market value. This can result in hidden reserves being realised, which triggers a property gains tax. The amount of this tax depends on the canton, the holding period and the difference between the acquisition cost and the current value. In addition, existing mortgages must be reassessed. Loan agreements are tied to the individual. When ownership changes, the bank reassesses the company’s ability to service the debt. Rental income is the primary factor here. The property must therefore be largely self-sustaining.

What are the advantages of a property company?

Despite the hurdles, a company structure can offer advantages. Within a company, interest on debt is generally fully deductible as a business expense. This provides greater tax stability where there is a high level of debt financing. In addition, depreciation can be claimed, thereby reducing taxable profit – without any actual outflow of cash. A company also offers advantages in succession planning: shares in the company are inherited rather than individual properties. This simplifies the division of assets in the event of inheritance and can help avoid conflicts.

Is selling an alternative?

Not every owner will opt for the company route. For some, a sale in the medium term may be the more sensible solution – particularly if returns come under pressure and the administrative burden increases.

Conclusion: It pays to plan ahead

The change in the property taxation system is increasing the pressure on leveraged investment properties. Whether transferring ownership to a company makes sense depends heavily on the individual situation: debt ratio, holding period, family succession and strategic objectives all play a key role. Careful planning is essential. Tax issues, financing structures and legal aspects are all interlinked. Those who plan early on create room for manoeuvre – and can make an informed decision as to whether ‘holding privately’, ‘transferring to a company’ or ‘selling’ is the right course of action.

Real estate, financial and mortgage expertise from a single source

The experienced property team at thomasgraf ag will be happy to advise you personally on the various aspects of home ownership – whether it be a flat or a detached house. This established property service provider also offers an exciting selection of attractive properties for sale in both categories. thomasgraf ag is a certified member of the Swiss Chamber of Estate Agents (SMK) and will also support you in the sale of a property – providing a personalised service that meets the highest quality standards. Thanks to thomasgraf ag’s close cooperation with the asset manager and family office service provider TRIONINVEST, as well as the financial services provider hypolino ag, we offer you combined property-specific and financial expertise, many years of industry experience and a strong network.