How to Declare Foreign Income or Real Estate in the Swiss Tax Return

As a taxpayer in Switzerland, you are required to declare your worldwide income and assets. This also includes all foreign income and real estate. Correctly reporting these values is essential to avoid legal consequences and to benefit from applicable double taxation agreements.

General Declaration Obligations for Foreign Assets

Worldwide Tax Liability in Switzerland

If you are tax resident in Switzerland, you are subject to worldwide taxation. This means you must report not only Swiss income and assets but also all foreign values in your tax return.

Swiss tax liability begins when you establish your habitual residence in Switzerland or stay at least 30 consecutive days with employment.

Difference Between Residents and Non-Residents

• Tax residents are taxed on worldwide income.
• Non-residents are only taxed on Swiss-source income.
  Foreign real estate and income are therefore only reportable by residents.

Declaration of Foreign Income

Where to Declare Foreign Income

Foreign income is entered under different sections in the Swiss tax return depending on the type of income:

• Employment abroad: Reported together with domestic income and fully taxable.
• Self-employment abroad: Foreign self-employment income is also added to taxable income.
• Capital income: Interest, dividends, and other capital gains from foreign sources must be listed in the securities and bank account statement.

Currency Conversion

All foreign amounts must be converted into Swiss francs (CHF). Use the official rates published annually by the Swiss Federal Tax Administration (FTA). For year-end values, use December 31 of the respective tax year.

Special Rules for Cross-Border Commuters

If you are a cross-border commuter (work in Switzerland but live abroad), special rules apply regarding tax liability and reporting.

Declaration of Foreign Real Estate

Property Assets and Imputed Rental Value

Foreign real estate must be fully declared under assets. If you own properties abroad, report these under your assets and include any income from them in your taxable income.

Imputed Rental Value for Owner-Occupied Foreign Property

For self-used foreign properties, an imputed rental value must be declared:

• Houses: 3.5% of the property’s tax value
• Apartments / units: 4.25% of the property’s tax value

Valuation of Foreign Real Estate

Valuation is generally based on market value. Use comparable local property values or obtain a professional appraisal. The declared value should be realistic and verifiable.

Tax Allocation for Foreign Real Estate

The tax authorities will perform a tax allocation to determine how the foreign property affects Swiss taxation. This ensures that applicable double taxation treaties are considered.

Losses from Foreign Properties – New Rule Since 2021

From the 2021 tax period onward, losses from foreign real estate (such as interest and maintenance costs exceeding rental income) are only taken into account for rate determination, not deducted from taxable income in Switzerland.

This means foreign property losses can influence your tax rate but no longer directly reduce your taxable income.

Maintenance Costs and Administrative Expenses

You can still deduct actual costs for maintenance, administration, and interest on foreign properties, but only for determining the tax rate.

Cryptocurrencies and Digital Assets

Reporting Obligations for Cryptocurrencies

If you hold cryptocurrencies as assets, report them in the securities and bank account statement. Unless you are trading professionally, capital gains or losses do not affect income.

Mining Income

If you earn cryptocurrency via mining, this counts as taxable income. Provide a statement of income and expenses with your tax return.

Documentation and Valuation

Proof of crypto holdings can be provided via a year-end wallet statement. The FTA publishes official tax values for major cryptocurrencies.

Asset Management Costs for Foreign Investments

Flat Rate vs. Actual Costs

For managing foreign assets, you can deduct either:

• Flat rate: 0.3% (3‰) of securities holdings
• Actual costs incurred
  Both deduction methods cannot be combined.

Automatic Exchange of Information (AIA)

What is the AIA?

Under the Automatic Exchange of Information (AIA), information on financial accounts is shared between partner countries. This means Swiss tax authorities automatically receive information about your foreign accounts and investments.

Consequences of Non-Declared Assets

If you previously failed to declare foreign assets, they may be discovered via the AIA. In such cases, a voluntary disclosure may no longer be possible.

Voluntary Disclosure for Non-Declared Foreign Assets

Penalty-Free Disclosure

You may file a voluntary disclosure if authorities are not yet aware of the non-declaration.

Important: Simply including undeclared assets in the regular tax return without explicitly indicating it is a voluntary disclosure does not qualify and may lead to penalties.

Penalties

Penalties for back taxes can range from one-third to three times the assessed taxes, depending on fault and personal circumstances.

Practical Tips for Correct Declaration

Documentation and Evidence

Collect all relevant documents for foreign income and assets:

• Bank statements and interest certificates
• Rental contracts and rental income proofs
• Purchase contracts and valuation documents for properties
• Dividend statements from foreign stocks
• Wallet statements for cryptocurrencies

Seek Professional Help

For complex foreign assets, consult a tax expert who can:

• Ensure correct valuation of foreign assets
• Optimize the use of double taxation agreements
• Assist in tax allocation
• Minimize reporting risks

Use of Double Taxation Agreements

Switzerland has agreements with many countries to avoid double taxation. They are usually applied automatically through the tax allocation.

Special Situations and Exceptions

• Diplomats and International Organizations: Special rules often apply to foreign income.
• Cross-Border Commuters: Bilateral agreements may influence the taxation of foreign income.
• Foreign Inheritances: Must also be correctly declared; special valuation rules apply.

Common Mistakes to Avoid

• Failing to declare all income, even small amounts
• Using incorrect currency conversion rates
• Underestimating foreign property values
• Missing supporting documentation for verification

Conclusion and Recommendations

Properly declaring foreign income and real estate is complex but essential for legal compliance. With the automatic exchange of information, undeclared assets are increasingly discovered.

Key points:

• Declare all foreign income and assets completely
• Use official valuations and exchange rates
• Keep thorough documentation
• Seek professional assistance for complex situations
• Leverage double taxation agreements
• Consult a tax advisor early if uncertain

A proactive and transparent declaration is always the best approach.