Switzerland Abolishes the “Imputed Rental Value” - What This Means for You

After 91 years, the Swiss have done it again: they have voted for common sense.

On September 28, 2025, the people of Switzerland decided with 57.7% in favor to abolish one of the strangest and most unpopular taxes in Europe: the Eigenmietwert, known in English as the imputed rental value.

If you have never lived in Switzerland, this concept is almost impossible to explain to a German, Brit, or American without sounding slightly mad.

Imagine this: you buy your own home, live in it, and yet the government taxes you as if you were renting it out to someone else. That is the imputed rental value.

For decades, Swiss homeowners have paid income tax on a fictional amount, a notional rent they never received. And now, at last, it is gone.

A Very Swiss Kind of Madness

The idea goes back to 1934. Switzerland was dealing with budget deficits, and the federal government introduced the imputed rental value as an emergency measure. Like most “temporary” taxes, it somehow became permanent and stayed for nearly a century.

The logic behind it was this: if tenants must pay tax on their income, and homeowners “save” rent by living in their own home, then that saving should also be taxed.

It was an attempt to create fairness between renters and owners, but it ended up punishing those who wanted to own their homes outright.

Under this system, the tax authority determined how much your home could be rented for, usually around 60% to 70% of the local market rent. That amount was added to your income as if you had actually earned it.

Of course, you could deduct certain expenses such as mortgage interest, maintenance costs, insurance, and even renovations. But the effect was absurd: the more debt you carried, the more tax-deductible interest you had, and the less you paid.

This created one of the great Swiss paradoxes: most homeowners never fully paid off their mortgages. It was simply not worth it. As long as you kept a large loan outstanding, you could offset it against the imputed rent and keep your taxable income low.

The result was a country where only around 40% of people own their home, one of the lowest ownership rates in the developed world. And even among those owners, very few are debt-free.

The Vote: Freedom, Common Sense, and a Little Swiss Defiance

Switzerland is a direct democracy, and this vote was a textbook example of it in action. For decades, politicians debated reform, but it was the people who finally forced change.

Left-leaning parties, bureaucrats, and even some economists warned of disaster.

They predicted falling tax revenues, underfunded schools, and, naturally, cuts to pensions.

But the public was not fooled.

On September 28, Swiss voters said enough.

They recognized what this tax really was: an outdated, paternalistic system that punished financial independence and distorted personal decision-making.

It was, in many ways, un-Swiss, an overreach by the state into the private sphere of citizens who had done nothing more than buy a home.

Now, that chapter is closing.

How the Imputed Rental Value Worked (and Why It Made No Sense)

To see how absurd the system was, let’s take a simple example.

Let’s say you owned a home in Zurich worth CHF 1.5 million.

The local market rent for a similar property might be around CHF 3,000 per month, or CHF 36,000 per year.

The tax office would take 70% of that (CHF 25,200) and add it to your income.

If you had a mortgage of CHF 850,000 at 1.5%, you’d pay CHF 12,750 in interest.

Add maybe CHF 7,500 in maintenance deductions.

That leaves CHF 4,950 of fictitious income, taxed as real income.

And that’s on top of your actual salary.

If that sounds confusing and bureaucratic, it was.

Each canton calculated the imputed value differently. Some used comparable local rents, others used a “hedonic” valuation model based on property characteristics, and some had their own formulas entirely.

Homeowners had to check every tax assessment and sometimes even file appeals if the authorities overestimated their property’s rental value, which happened frequently.

It was a bureaucratic maze for something that never should have existed in the first place.

What the Abolition Means

From now on, owner-occupied homes, both primary and secondary residences, will no longer be subject to the imputed rental value.

That is the good news.

But as always in Switzerland, there is a trade-off.

Because homeowners will no longer be taxed on fictional rent, many of the old deduction options are being abolished as well.

That means:

No more deductions for mortgage interest, except limited cases for first-time buyers or secondary properties.

No more deductions for maintenance and renovations, unless your home is a listed historic building or qualifies for special cantonal programs.#

No more deductions for energy-saving improvements or demolition costs at the federal level.

In short, the system is simpler, fairer, and cleaner, but also less flexible.

Winners and Losers

According to UBS, the biggest winners are:

• Homeowners with little or no mortgage debt, especially pensioners. For them, the tax burden on their main residence effectively disappears.

• Owners of newer apartments in cities with high market rents but low maintenance needs. Their imputed rental value was high, but they had few deductible expenses anyway.

• First-time buyers, who will enjoy limited interest deductions, up to CHF 5,000 per person in the first year, reducing gradually over ten years.

The losers of this reform include:

• Owners of older properties who regularly invest in renovations, as they will lose the ability to deduct maintenance costs.

• Second-home owners, especially in mountain regions, who may face a new cantonal property tax designed to replace lost revenue.

• Banks and the construction sector, which may see less demand for mortgages and renovations now that the tax incentives are gone.

For most households, however, the reform means a clearer, simpler system, and for many, a smaller tax bill.

What This Means for You if You’re Thinking About Moving to Switzerland

If you have been considering emigrating to Switzerland, this reform is great news.

Let’s say you are a German or Austrian professional planning to buy a home there. Until now, the imputed rental value was a hidden cost that made homeownership less attractive.

Now, that barrier is gone.

You will still pay the wealth tax on the value of your Swiss property, as you would on any assets held in Switzerland, but you will not pay income tax on pretend rent.

That is particularly relevant if you plan to buy your home outright, without a mortgage.

Under the old system, you were actually penalized for doing so because you lost your interest deduction while still paying tax on the imputed rent.

Now, you can own your property debt-free without paying a single franc of income tax on it.

For anyone moving to Switzerland with significant capital, that is a major improvement.

A Word of Caution: Foreign Ownership Rules Still Apply

Of course, Switzerland would not be Switzerland without a few exceptions and complications.

As a non-resident, you can generally only buy a holiday home, and even then, only within strict quotas. Some cantons allow just a few hundred such purchases per year, mostly in designated tourist zones.

If you are an EU citizen with a Swiss residence permit (B permit), you can freely buy your primary residence, the home you actually live in.

However, if you want to buy additional properties, a second home or investment property, you will need a special authorization under the Lex Koller law.

That is why it is crucial to plan your move properly: first residency, then property.

The Broader Picture: Switzerland’s Enduring Appeal

For many Germans, Austrians, and Swiss expatriates abroad, Switzerland remains the most attractive destination in Europe, and for good reason.

Every year, more than 20,000 Germans move to Switzerland, drawn by higher salaries, lower taxes, and a well-functioning state.

You can easily earn double or triple what you would in Germany and pay only one-third to one-half the taxes.

The country is clean, safe, and efficient. The currency is stable. The government is small.

Switzerland is not part of the EU.

In short, it is everything most of us wish our home countries still were.

And while not everything is perfect, housing is expensive and bureaucracy can be idiosyncratic, Switzerland remains one of the few Western countries where competence, accountability, and fiscal discipline still matter.

That alone makes it worth considering, especially as a first step for those planning a longer-term exit from the EU.

Practical Advice Before You Buy

A few practical points for anyone considering homeownership in Switzerland:

Do your tax planning early.

Even though the imputed rental value is gone, wealth tax still applies, and rates vary by canton and even by municipality.

Do not rush to pay off your mortgage completely.

With the abolition of the imputed rental value, many Swiss banks will likely adjust lending practices. A moderate loan-to-value ratio keeps liquidity flexible and may allow for better long-term returns elsewhere.

Bring forward renovations.

If you already own Swiss property, now is the time to complete energy-efficiency or maintenance projects. During the transition phase, you can still deduct these costs before the new system takes effect.

Be aware of cantonal differences.

Each canton will implement the new rules on its own timeline. Some may introduce compensatory taxes or preserve certain deductions.

Get expert advice.

Whether it is about residency permits, exit taxation from Germany, or structuring your business income, Switzerland rewards those who plan ahead.

A Simpler System, and a Symbolic Victory

The abolition of the imputed rental value is more than just a tax reform. It is a symbolic victory for common sense and personal responsibility.

It eliminates a century-old distortion that encouraged debt, punished thrift, and created unnecessary bureaucracy.

It is also a reminder of how Switzerland works: the people, not the politicians, make the final call.

As UBS noted in its analysis, the reform will simplify tax planning and bring long-overdue clarity to property ownership. But it also reflects something deeper: a culture that still believes in rewarding prudence, independence, and self-reliance.

For future immigrants and investors, that is not just good news, it is a sign that Switzerland remains one of the few places in the world where freedom still means something.

Consultation

If you are planning to move to Switzerland and want to know how the abolition of the imputed rental value affects your personal situation, we would be happy to help.
Our firm advises entrepreneurs, investors, and professionals from the German-speaking world on tax optimization, relocation, and asset protection.

Book a personal consultation with Sebastian and his team. We will review your residency plans, analyze your cross-border tax situation, and help you design a structure that minimizes tax and maximizes flexibility.

Schedule your consultation today.

In short:
The end of the Eigenmietwert marks the beginning of a simpler, freer, and fairer era for homeowners in Switzerland.
If you are planning to move there, it is one more reason to make that decision sooner rather than later.

Because while the rest of Europe keeps inventing new ways to tax you, the Swiss have just abolished one, and that says everything.