We sold our Swiss house...and this is what we learned in the process
It has been ages since I put pen to paper and for good reason; in short, we spent most of last year in the throes of selling our home.
Well actually—the house was signed away in an instant but the months leading up to actual signature were chock-a-bloc full of list-writing and countless trips to the déchetterie, box packing and multiple celebrations in the name of the 13 glorious years we spent as owners of a truly lovely home.
Anyway, in the aftermath of the pack out and settling in, I thought useful to share three of the lessons we learned in the process.
What You Will Owe to the Tax People
As the saying goes, the only certainties in life are death and taxes. In Switzerland, you have 30 short days from the moment you sign away your home to report your sale and capital gain, if any, to the tax authorities. Capital gain is calculated as the difference between your sales price and your original purchase price, adjusted for certain expenses and any value-added transformations you made to the property while you owned it.
There is good reason to take this 30-day deadline seriously. The notary, during the final sales signature meeting, will hold back 5% of the sale price as a guarantee to the tax office of your eventual tax obligation. For the average seller, this amount can greatly exceed any capital gain liability. By making the deadline, you get your place in the queue for processing, which in Nyon District currently amounts to about 4-5 months, and you thus have the opportunity to claim back any/all of the hold back.
In the Canton of Vaud for example, the capital gain tax rate varies between 7% and 30% depending upon the length of time you have owned and lived in the property. Years in which you are resident count as double, meaning that 12 years of owner-occupied housing allow you to reach the lowest marginal tax rate of 7%. On the other hand, if you were to buy and sell in the first year of ownership, you could owe a whopping 30% on any capital gain realised. The Swiss authorities use this sharply digressive scale to discourage anyone from considering short-term house flipping (or more complex real estate speculation).
However, one very important caveat. You are allowed to “adjust” the net gain by certain eligible expenses (e.g., realtor and notary fees) including if you have made and can prove value-added investments over the course of ownership. Think adding on a garage or a winter garden. Generally these qualified expenses are notrelated to maintenance or renovation (like retiling your master bath), which you would have already deducted on your annual income tax return. In fact, no previously-reported deductions are allowed to be reported to offset the capital gain.
When the Paper Trail Pays Off
If you are someone who squirrels away paper and keeps great records, this part of the exercise will be easy for you. If you have an overzealous partner with a brand new professional shredding machine and a penchant to rid your soon-to-be-moved-minimalist-existence of years of “old and unnecessary tax and bank files”, you might be in trouble (yes you guessed it, this was our case).
Not only does the taxman require you to submit all “original” invoices with your claim, they also require proof that you paid that invoice. Remember the days when we all used to stand in line and pay bills in cash using the pink bulletin de versement? That tiny pink stamped receipt is now worth its weight in gold—that is, if you knew enough to attach it to the original invoice and keep it in a box for decades safely away from the shredding man.
For more recent transactions and since the advent of online banking, a bank statement showing the payment should suffice. These are the rules no one tells you about when you buy a house which would really be the optimal time to start following them!
Finally, Notaries are Busy People
So busy that you can probably only count on them actually looking in detail at the relevant information required for your house sale quite late in the process. If a realtor has been involved and is assuring the relay between you and the notary, communication can often take longer. When they do finally realise your sale is next on their calendar, they undoubtedly discover they are missing some critical piece of paper that you have failed to provide and that sales date you have had in the calendar for months will be threatened. In the best case, this will result in instantaneous and overbearing stress for all involved until resolved. In the worst, it could jeopardise your sale. So the lesson here is be informed, be involved, ask questions early on and be sure to reconfirm with all parties that everything is in order well in advance of your sale date.
The final lesson and reward will be the fact that you, the seller, do not bear the notary’s costs for the sales transaction and if you are lucky, the majority of that 5% holdback with the tax people will be returned to you in six months’ time with a statutory 5% interest included for your effort.