introduction

When selling a property in Switzerland, there is an important issue for you: The Real estate gains tax. This tax is charged on the profit you make when you sell your property. But don't worry — with a good understanding of the rules and possible exceptions, you can significantly reduce your tax burden.

In this article, we analyse the mechanisms of real estate gains tax in the Canton of St. Gallen. You will learn when the tax is due, how it is calculated, and which deductions or exemptions apply to minimize the tax burden. Based on real examples We show how various transactions affect real estate gains tax in St. Gallen.

What is real estate gains tax?

Real estate gains tax in Switzerland is a property tax that is different from income and wealth tax. While the economic performance of the tax subject (person) is taken into account when calculating income and wealth taxes, real estate gains are taxed regardless of the income and wealth situation.

The profit on which this tax is levied is derived from Difference between selling price and investment costs. As a seller, you can in most cases enjoy this profit thanks to increasing demand for residential property, but you must note that part of the profit must be paid to the state as real estate gains tax.

How is real estate gains tax calculated and what can be deducted?

Taxable profit = Sales revenue — investment costs

The following positions belong to the Investment costs:

• Purchase price
• Property transfer costs for purchase and sale (notary and land registry fees)
• Attorneys' fees
• Value-increasing investments (= costs that permanently increase the value of the property), such as the construction of an extension, conversion or development costs. Insurance benefits or funding contributions from the federal, cantonal or municipal authorities are deducted from this.
• Placement costs (e.g. brokerage commission or advertising costs)
• Approval fees
• Real estate taxes such as sidewalk, sewerage or value-added taxes
• Other costs associated with the sale of the property (e.g. incident compensation in the event of early withdrawal from the mortgage agreement)

example:

Across this post, we are looking at the Studer couple. They sell their single-family house in Abtwil, St. Gallen.

In this example, the taxable profit is therefore

• Sales revenue CHF 1'161'400 - investment costs CHF 851'600
• = CHF 310,000

Attention: The investment costs can only be claimed if they are properly documented. Especially in the case of renovations, a distinction must be made between real estate maintenance (which you can deduct from the imputed rental value) and value-enhancing investments (such as the photovoltaic system here, which you can deduct from real estate gains tax).

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After the profit has been calculated, the next step is to calculate the real estate gains tax. This is based on Amount of profit and period of ownership. In most cantons, a higher tax must be paid on profits realized in the short term, including in St. Gallen. If the holding period is less than 5 years, a surcharge is due. If you owned the property for over 15 years, you will benefit from a reduction.

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How high is the real estate gains tax in St. Gallen?

Like income tax, real estate gains tax is calculated as a multiplier of simple tax and tax rate. In 2024, the Canton of St. Gallen has a uniform total tax rate of 325% for real estate gains tax.

Source: Own calculation based on Art. 140, paragraph 1 StG (Tax Act) of the Canton of St. Gallen, retrieved from https://www.gesetzessammlung.sg.ch/app/de/texts_of_law/811.1

instance

The Studer couple generated a nice real estate profit of CHF 310,000, meaning that the tax burden according to the table above is between 29.25% and 31.47%. Specifically, the simple real estate gains tax in this example with a total tax rate of 325% is CHF 93,697, which corresponds to 30.22% if neither a reduction nor a surcharge is applied.

How does real estate gains tax change with a short holding period in the canton of St. Gallen

For a holding period of less than 5 years, the Canton of St. Gallen has a surcharge:

• 5% in the first year after purchase
• 4% in the second year
• 3% in the third year
• 2% in the fourth year
• 1% in the fifth year

Source: Own calculation based on Art. 141b, paragraph 1 StG (Tax Act) of the Canton of St. Gallen, retrieved from https://www.gesetzessammlung.sg.ch/app/de/texts_of_law/811.1

The fact that the surcharges are having a moderate effect is particularly clear when you present the data as a diagram.

instance

Let us assume for a moment that the Studer couple had only owned the property for 3 years. In this case, the 3% surcharge would be added in the third year of ownership. Instead of CHF 93,697, the couple would pay CHF 96,508.

How does real estate gains tax change in the canton of St. Gallen in the case of a long holding period

In addition to the surcharge for a short holding period, the Canton of St. Gallen also has a reduction for a long holding period. After a 15-year holding period, the real estate gains tax is reduced annually.

• 1.5% per year with a real estate gain of less than CHF 500,000 (maximum reduction 40.5%)
• 1% per year with a real estate gain of over CHF 500,000 (maximum reduction 20%)

instance

If the Studer couple owned the property for 20 years, the tax burden is reduced by 5 x 1.5%, i.e. by 7.5% in total.

Your tax burden is thus reduced by CHF 4,126 to CHF 89,481.

Real estate profit tax calculator

Here you can find the official tax calculator of the Canton of St. Gallen: https://www.sg.ch/steuern-finanzen/steuern/steuerkalkulator/grundstueckgewinnsteuer.html

If you would like an exact assessment, fill out the Advance calculation of real estate gains tax form and send the completed form to the cantonal tax administration:

Cantonal tax office

Real estate gains tax

Davidstraße 41

P.O. Box 1245

9001 St. Gallen

How can real estate gains tax be deferred in St. Gallen?

Real estate gains tax can be deferred in certain cases. The most common case is the purchase of replacement property in Switzerland with the proceeds from the sale. The following rules apply in the canton of St. Gallen:

• The sales proceeds must be reinvested within three years (deadline extension possible in exceptional cases).
• It must be owner-occupied residential property.
• It is also permitted to purchase the replacement property within one year before the sale of the property to be replaced.

Other reasons for a tax deferral include:

• Change of ownership through inheritance, advance inheritance or donation
• Change of ownership between spouses following change of property rights, separation or divorce

In these cases, tax is only due when the property is sold to a third party. The calculation is then based on the original purchase price, taking into account the previous owner's period of ownership.

Key restrictions

The tax deferral does not apply to:

• Holiday apartments
• Leased properties
• Second homes

In the case of apartment buildings, only the share for the owner-occupied apartment can be deferred. The rest must be taxed immediately.

So how can you minimize your tax burden?

In summary, we note that real estate gains tax in St. Gallen can be minimized as follows:

• Collect all receipts for value-adding investments as well as invoices from notaries and offices carefully.
• Keep the real estate for a long time: For 5 years or less, the tax is increased; from the 16th year of ownership, the tax is reduced.
• Use the investment income from the sale of your property within 3 years to purchase new residential property

Contact CREATIOto find out more about the real estate gains taxes that apply to you when selling your property in St. Gallen.

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