Demand for Geneva upscale property falls amid tax break fears

Published:  3 Sep at 6 PM
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Uncertainty over the future of Switzerland as a tax haven for wealthy expats is causing a sharp fall in Geneva’s real estate market.

For 150 years, Switzerland’s tax breaks and secrecy have attracted the seriously wealthy to its manicured cantons with their exquisite, expensive mansions. The system allows foreigners exemption from wealth and income taxes, replacing them with a flat fee calculated on the annual rental value of their homes.

Ordinary canton and federal tax rates are applied to the estimated rental value, and no account is taken of worldwide income or the actual value of assets including the home. Specifically aimed at the mobile millionaire set, the only rule is that those taking advantage of the scheme are not allowed to earn money in the country.

After pressure from Swiss nationals unhappy about the number of wealthy expats resident in the country, proposals for the tax break’s cancellation were submitted to the Swiss parliament. In spite of the government’s rejection of the proposals, pressure to scrap the law is still being exerted, and is causing a fall in demand for Geneva’s exclusive high-end real estate.

Knight Frank’s Alex Koch de Gooreynd believes indecision is literally killing the market as it’s bringing about fears that the 150 year-old tax break will soon be history. During the past year, Geneva’s luxury homes market has fallen by 25 per cent, with would-be buyers now renting as a first option whilst the government continues to deliberate.

In one of the city’s most exclusive lakeside areas, Coligny, 15 luxury villas are now on the market, against just one in 2011, as owners take their millions elsewhere. Along with the tax break threat, the country is also easing Swiss banks’ traditional total secrecy, which allowed tax evasion on a large scale by the rich.
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