Tax on profit and earnings made on real estate
All sales of real estate situated in the canton of Geneva carried out within the context of private or commercial wealth are liable to tax on profit and earnings made on real estate (IBGI). The tax authority must be notified of the sale within 30 days following signing with the notary.
In order to complete your IBGI declaration, you must determine the amount of capital gains (and development representing capital gains) and the payment of the corresponding tax.
IBGI: calculating the amount of tax due
When the vendor sells a property for a higher price than the original purchase price, he/she generates capital gains. This gain, or profit, is liable to tax on profit and earnings made on real estate.
The method for calculating the profit differs depending on the canton in which the sold property is located. In the canton of Geneva, the profit is considered to be the difference between the sale price (disposal value) and the purchase price (acquisition value).
It should be noted that certain ancillary expenses may also be taken into account in this calculation:
- Brokerage costs
- Notarial fees
- Registration fees
- Refurbishment works which increase the value of the property, termed ‘property development’ (extension, addition of new elements such as a swimming pool, veranda, etc.)
The acquisition price can be difficult to define, particularly where the property has belonged to the family for several years. In such a case, the cadastral value and the market value may serve as points of reference.
Finally, if the profit you generate from the sale of your property is used to pay for the acquisition of housing, tax will only be due at the time of this next purchase (deferred tax).
IBGI: which tax rate to apply?
The tax rate to use for your declaration of tax on profit and earnings made on real estate is set according to the duration of your possession of the property. In the canton of Geneva, it is a degressive rate:
- For less than 2 years: the rate is 50%
- For at least 2 years: the rate is 40%
- For at least 4 years: the rate is 30%
- For at least 6 years: the rate is 20%
- For at least 8 years: the rate is 15%
- For at least 10 years: the rate is 10%
- For at least 25 years: non-taxable
Estimating the value of a property for sale and the value of property acquisition can prove complex.
Our team of legal and tax advisors is well-versed in the subject and will help you with your tax and administrative procedures regarding your declaration of tax on profit and earnings made on real estate. Contact us by email or on +41 22 906 11 77.