VAT and private individuals: what are the implications for investment properties?

InsightsNewslettersSwiss Tax NewsletterSwiss tax newsletter - November 2025

VAT & private individuals: impact on investments

In Switzerland, private individuals renting out properties are usually VAT-exempt but exceeding CHF 100,000 in turnover triggers mandatory registration. Holiday rentals, parking spaces, and voluntary registration for commercial rentals bring specific rules and opportunities. Learn how to navigate these VAT rules and make the most of your rental income.

In Switzerland, the letting of buildings is in principle excluded from the scope of VAT, meaning there is no entitlement to deduct input tax. This rule applies to both residential and commercial premises.

Therefore, an individual who rents out one or more properties is generally not required to pay VAT, regardless of their rental income, as long as their activity remains limited to exempt transactions. However, there are certain exceptions and even a few pitfalls. Below is an overview of how VAT applies to property rentals for private individuals, based on practical examples.

The option for voluntary taxation

Although real estate is generally excluded from taxation, the owner may nevertheless opt for voluntary taxation of their commercial rentals. This option may be financially advantageous when significant investments, renovations or maintenance are required. This is because the VAT charged on these expenses becomes deductible, subject to legal conditions.

In practice, VAT charged on commercial rents does not usually represent an additional cost for tenants, as they are themselves liable for VAT and can recover it in their own accounts. The option therefore allows the lessor to deduct input tax while maintaining tax neutrality for the tenant.

However, the option is not available for residential properties (places of residence), which remain excluded from the scope of VAT.

Special exceptions

Certain rentals are explicitly taxable, regardless of any option:

  • Holiday rentals: taxed at a special rate of 3.8% (effective in 2025), whether offered directly or via platforms (Airbnb, etc.).
  • Parking spaces: taxed at the standard rate of 8.1% (effective in 2025) when rented separately from a main lease.
  • Advertising revenue: the use of advertising space or similar media is taxable, unless it is incidental to a main rental that is exempt.

Private owners of holiday apartments

This section focuses on individuals who own investment properties privately, particularly holiday apartments, and highlights common practical scenarios:
 

Variant A
Situation
  • An employee privately owns holiday apartments in Switzerland, generating approximately CHF 50,000 in annual revenue.
  • He or his family uses one of the apartments when it is not rented out.
Turnover
  • Approximately CHF 50,000 (income) + private use to be valued.
VAT  – Analysis
  • The FTA considers the activity to be entrepreneurial from CHF 40,000 of income (including VAT).
  • However, VAT liability only becomes mandatory from CHF 100,000 in turnover.
  • Private use must be valued at its fair rental value and determined each year in order to verify the threshold.
Practical consequences
  • Annual review of the turnover threshold. 
  • Private use must be valued each year → complex administrative monitoring.
Variant B
Situation
  • An employee privately owns holiday apartments in Switzerland, generating approximately CHF 85,000 in annual revenue.
  • He or his family uses one of the apartments when it is not rented out → The value of private use amounts to CHF 20,000.
Turnover
  • CHF 105,000 (income + private use).
VAT  – Analysis
  • CHF 100,000 threshold exceeded → VAT liability.
  • VAT is payable on all accommodation services, including private use.
  • In principle, the owner must keep commercial accounts showing income and expenses related to this activity.
  • They may deduct the related input tax, subject to providing the necessary evidence.
Practical consequences
  • VAT registration liability. 
  • VAT payable on income + private use. 
  • Accounts must be kept. 
  • Input tax deductible (evidence required).
Variant C
Situation
  • A self-employed person runs a shop (CHF 60,000 in revenue).
  • He owns holiday apartments in his private assets that generate CHF 50,000 in rental income and are also used privately from time to time.
  • He is not registered for VAT.
Turnover
  • Approx. CHF 110,000 (CHF 60,000 + 50,000 + private use).
VAT  – Analysis
  • Rentals exceeding CHF 40,000 are considered a business activity.
  • As rentals are considered entrepreneurial, they must be included in the self-employed activity. 
  • Rental income is added to the self-employed activity → VAT threshold exceeded.
  • Decisive turnover includes:
  • CHF 60,000 (shop)
  • CHF 50,000 (rentals)
  • the valuation of private use.
  • The threshold of CHF 100,000 is exceeded: obligation to register for VAT.
  • Input tax is in principle deductible with supporting evidence.
Practical consequences
  • VAT registration liability. 
  • VAT due on total turnover (according to applicable rates)
  • Input tax deductible (proof required).
  • Requirement to account for all transactions.
Variant D
Situation
  • A self-employed person already subject to VAT for their consulting activity (CHF 350,000 in turnover).
  • They privately own holiday apartments generating CHF 40,500 in rent, which is not accounted for in their business.
Turnover
  • CHF 390,500
VAT  – Analysis
  • As the rentals are considered entrepreneurial, they must be included in the self-employed activity. Rental income is added to the self-employed activity.
  • Rental income is subject to the special accommodation rate.
  • The related input tax is deductible, subject to proof.
Practical consequences
  • VAT due on rental income. 
  • Input tax deduction possible (under certain conditions).

Key points to remember

  • The FTA considers gross rental income of CHF 40,000 or more to constitute a business activity.
  • From CHF 100,000 in turnover, VAT registration becomes mandatory.
  • VAT registration allows you to deduct VAT on business-related expenses and recover input tax on investments, subject to sufficient evidence.

Conclusion

VAT and real estate are a combination that is often underestimated. Many individuals who rent out their investment properties may find themselves subject to VAT without having anticipated it. A preliminary analysis is essential not only to avoid tax risks but also to identify opportunities for optimisation through the right to deduct input tax.

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