Real estate gains tax Basel-Stadt. Innovations as of 1.1.2023

• Real Estate
• Tax Law

As of 1.1.2023, two significant changes to real estate gains tax have come into force in Basel-Stadt. On the one hand, the real value of 2002 instead of 1977 will be used as the replacement value for the acquisition costs. Furthermore, the tax rates will be simplified, but increased for short periods of ownership of properties that are not owner-occupied..

Property gains tax in Basel-Stadt

Real estate gains tax is payable on the sale of a property at a profit. In the canton of Basel-Stadt, the so-called monistic system applies. This means that real estate gains are recorded with this separate tax for natural persons and legal entities. The real estate gain consists of the difference between the sales proceeds and the investment costs since the last change of ownership of this property for a consideration. As in all cantons, the time span between purchase and sale – i.e. the holding period – has an influence on the amount of the real estate gains tax. Short-term (speculative) transactions should be taxed more heavily than long-term ownership. As of 1 January 2023, an important revision has come into force in Basel-Stadt in this regard. On the one hand, this concerns the replacement value (real value) in the case of a long holding period and, on the other hand, the determination of the tax rate or the amount of the tax burden.

New Replacement value for investment costs

If the acquisition of a sold property took place a long time ago, it may be difficult or even impossible to prove the investments that reduce the real estate gain. In this case, taxpayers can therefore claim a replacement value instead of the actual investment costs. In the canton of Basel-Stadt, a fixed valuation date is used for this purpose. Previously, this was possible for properties acquired before 1977 by applying the real value as of 1 January 1977; this was determined by the tax administration upon request. As of 1 January 2023, a shift to the real value as of 1 January 2002 has now been made. This date was appropriate because the values of the tax administration are already known due to the general revaluation of all properties as of this date. Effect: This means that in many more cases than before (namely for all properties acquired between 1977 and 2001) the (often higher) replacement value can be used. The right to prove higher effective investment costs is reserved. The canton expects that all taxpayers will be better off with the new replacement value.

New calculation of property gains tax

Furthermore, the tax rates for the sale of a property in Basel-Stadt were adjusted as of 1 January 2023. Now, the period of ownership no longer has an influence on both the determination of the profit and the tax rate. For the purposes of simplification and greater transparency, there is now only one graduated tax rate, in which the deduction for the length of ownership is already integrated.

The above-mentioned tax-reducing effect of the postponement of the replacement value to 1 January 2002 is offset by a higher tax rate for properties not used as owner-occupied homes with short and medium ownership periods. Here the tax rate of 60% is 12% higher than before up to five years of ownership. Only in the sixth year is there the first relief. After ten years of ownership, however, the tax burden is even 15% higher than before, at 40.5%. Only after a holding period of 15 years is the tax burden no higher than before, at 21%. Between 16 and 25 years of holding, it is reduced linearly to the minimum rate of 12%. Real estate gains of legal entities are also taxed in this way, with the exception of reinvested depreciation:

For owner-occupied properties, the tax burden remains the same as before even after the simplification of the system: the tax burden is reduced from 30% linearly to the minimum rate of 12% from a holding period of between 6 and 25 years.

It should be noted that in the case of a replacement acquisition for the same purpose (residential, investment property, business property), the real estate gains tax can be deferred, even across cantons.

Conclusion

In any case, a property sale needs to be well prepared. In addition to the achievable proceeds, the burden of real estate gains tax is an essential factor for the success of the transaction.

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