Property gains tax Zurich: Market value 20 years ago and loss offsetting

If a company has operating losses, the question arises as to whether these operating losses can be offset against the profit from the sale of properties.

It is generally possible to offset a loss against an extraordinary gain from the sale of properties (whereby in a first step the loss is offset against the ordinary operating profit). In the case of an extraordinary gain from the sale of real estate, the remaining loss is first offset against the recaptured depreciation (difference between acquisition value and book value) and only in a second step against the capital gain (difference between book value and sale price), which is subject to real estate gains tax.

If properties are held for longer than 20 years, the market value 20 years ago can be used instead of the historical acquisition value. The increase in value between the historical acquisition value and the market value 20 years ago is therefore not taxed, which is why this is referred to as a statutory taxation gap.

In the case of capital gains, however, the portion of the profit that is not subject to property gains tax due to the market value 20 years ago must also be taken into account for the loss offset. According to the practice of the Canton of Zurich, the operating loss is first offset against the profit, which is generally exempt due to the taxation gap (when the market value 20 years ago is claimed). Consequently, the tax gap is "filled" or the loss is offset against the actual tax-free difference between the historical acquisition value and the market value 20 years ago.

In the canton of Zurich, however, loss offsetting for property gains tax is an "optional provision". Accordingly, the taxpayer can waive the offsetting of losses in order to continue to benefit from the tax gap. A waiver is particularly useful if the operating loss can be offset against taxable profits in the future. In intercantonal relationships, however, there is generally no right of choice.

A careful analysis of the available tax law options is essential in individual cases if you want to benefit from the tax planning options.