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Rental income · Tax treaty · Foreign tax credits

Swiss Rental Property Owned by a German Resident

Anyone resident in Germany who lets a privately held Swiss property generally needs to account for the rental income in both countries. Germany taxes the net rental income calculated under German law and credits Swiss income tax within statutory limits.

As of 12 October 2026. This article covers directly owned property held as a private asset where the owner is resident in Germany for treaty purposes.

The basic rule

Two tax calculations for the same property

The property’s location gives Switzerland a right to tax. This does not create a general exemption from German tax. Income from ordinary private letting is also included in the German income tax calculation.

The Swiss tax assessment is therefore important evidence, but it does not replace a German calculation of net rental income. Different rules for maintenance, loan interest and depreciation can result in the two countries assessing different amounts of income.

A German residence alone does not resolve every treaty question. Where homes are available in both countries, residence under Article 4 of the treaty must first be established. Companies, business assets and commercial property dealing require a separate assessment.

Tax treaty

Swiss taxing rights and a German foreign tax credit

ART. 6

The country where the property is located may tax the income

Article 6(1) and (3) of the Germany–Switzerland double taxation agreement covers income from letting immovable property. Switzerland may tax the income as the country where the property is located. This right is not exclusive.

ART. 24

No general exemption

The exemption under Article 24(1), point 1(a), covers certain business profits and immovable property functionally connected with those activities. An ordinary private investment generally does not qualify.

TAX CREDIT

Since 2026: point 3

For the standard case discussed here, the credit follows from Article 24(1), point 3, of the treaty in conjunction with section 34c EStG. For periods up to and including 2025, the corresponding provision was contained in point 2.

German taxation with a credit for Swiss income tax: For ordinary private letting, income calculated under German law forms part of the German tax base. Swiss income tax is credited subject to the treaty and statutory requirements.

Federal Fiscal Court on the distinction: decision of 30 September 2020

In case I R 12/19 (I R 78/14), the German Federal Fiscal Court (BFH) explained the exception: exemption of property income requires a functional connection with a qualifying permanent establishment activity. The letting must constitute an economically ancillary or supporting activity. Without this connection, the credit method applies.

The case concerned a Swiss company and the controlled foreign company rules applicable at the time. The treaty analysis explains the distinction between exemption and credit relief. The statements concerning companies relate to the provisions applicable to that case.

Read the full BFH decision
German income tax

Calculate net rental income under German law

The starting point is rental receipts, including service charges received from tenants. Deductible income-related expenses and building depreciation are then determined under German law.

Item German treatment Supporting documents
Rent and service charges Generally recognised in the year received; observe the statutory exceptions under section 11 EStG. Rental agreements, bank records and annual statements.
Running expenses Allocate rental-related costs under German law; exclude private portions. Invoices, payment records and a documented allocation method.
Financing Economically connected loan interest may be deductible. Principal repayments are not income-related expenses. Loan agreement, interest statements and evidence of how the loan proceeds were used.
Depreciation Depreciation applies to the building component; land is not depreciated. Purchase price allocation, ancillary costs, completion year and depreciation history.
Swiss income tax Assess credit eligibility separately; do not simply deduct it as an ongoing property expense. Tax assessment, tax calculation and proof of payment.

Keep CHF/EUR conversions transparent

The German return requires amounts in euros. Document the exchange rates used and the timing of income, expenses and acquisition costs. Acquisition costs are not revalued each year at the current exchange rate. Simply converting the Swiss net income at a year-end rate does not replace a German income calculation.

Income-related expenses & depreciation

Which costs are deductible?

Loan interest and financing

From a German perspective, what matters is how the loan was actually used. A mortgage secured on the Swiss property does not, by itself, establish a connection with its letting. Where funds are used for mixed purposes, an allocation is required.

Principal repayments and the value of your own labour are not deductible.

Maintenance and renovation

Repair and maintenance expenses may generally be deductible immediately. Acquisition and construction costs, by contrast, are generally recognised through depreciation. Swiss flat-rate deductions or classifications do not automatically apply in Germany.

Section 6(1), point 1a, EStG is particularly important: if qualifying repair and modernisation expenditure within three years of acquisition exceeds 15% of the building’s acquisition costs, excluding VAT, it may constitute capital expenditure incurred shortly after acquisition. Statutory exceptions must be assessed separately.

Building depreciation

For ordinary privately held rental buildings, annual straight-line depreciation under section 7(4) EStG generally amounts to:

  • 3% for buildings completed from 2023 onwards,
  • 2% for buildings completed between 1925 and 2022,
  • 2.5% for buildings completed before 1925.

The relevant basis is the building’s acquisition or construction costs, including associated ancillary costs. A substantiated shorter actual useful life may be relevant. The new declining-balance building depreciation under section 7(5a) EStG does not cover Swiss property because it requires an EU/EEA location.

Management and mixed use

Property management, building insurance, rental-related advice and documented trips to the property may be deductible income-related expenses. Where the property is also used privately, income and costs must be allocated appropriately.

Additional requirements must be assessed for below-market letting, vacancies or temporary personal use. Separate guidance on holiday homes with mixed use is available here.

Avoiding double taxation

How the foreign tax credit works

Swiss income tax on the relevant income is eligible for credit if it was levied in accordance with the treaty and is not refundable. The assessment, payment and allocation must be evidenced. Entitlements to refunds or reductions must be taken into account.

The credit is limited to the German foreign tax credit ceiling. Under section 34c EStG, this is generally calculated using the German average tax rate and the relevant foreign income. Other Swiss income and losses may affect the calculation.

Simplified example

Assume relevant Swiss income of EUR 20,000 and a German average tax rate of 30%. The foreign tax credit ceiling is then EUR 6,000.

If eligible Swiss tax is EUR 4,000, the full EUR 4,000 can be credited. If it is EUR 8,000, no more than EUR 6,000 can be credited. The excess is not automatically refunded or carried forward.

Distinguish between types of tax

Swiss wealth tax is not income tax creditable against German income tax. Property tax, fees and real estate capital gains tax must also be assessed separately from ongoing income tax.

The alternative deduction of foreign income tax upon application under section 34c(2) and (6) EStG requires a separate calculation.

Loss relief

Swiss rental losses can only be used within specific limits

Switzerland is a third country for section 2a EStG purposes. It is neither an EU nor an EEA member. Under section 2a(1), sentence 1, point 6(a), EStG, losses from Swiss rental property can generally only be offset against positive income of the same type from Switzerland.

  • No ordinary offset against German employment income, German pensions or German net rental income.
  • Offset may also be possible against qualifying income from another Swiss rental property owned by the same taxpayer.
  • Unused amounts may reduce corresponding positive income in subsequent years. They must be determined separately.
  • The general loss deduction under section 10d EStG is not available for these amounts.

BFH: loss carryforwards do not pass to heirs

In its judgment of 23 October 2019 – I R 23/17, the BFH held that remaining losses from letting a Swiss house do not pass to an heir through succession. Continuing the letting and taking over the financing do not change this outcome.

This matters for succession planning and major renovations: an assessed loss is not a freely transferable tax entitlement.

Read the full BFH judgment
Swiss procedures

Tax liability in the canton where the property is located

Ownership of Swiss real estate generally creates limited tax liability based on an economic connection. Direct federal tax and cantonal and municipal income and wealth taxes must be considered. Depending on the canton or municipality, additional property-related charges may apply.

Disclose worldwide income and assets

Information on income and assets outside Switzerland may also be required to determine the applicable tax rate and the international allocation of taxable income and assets. This does not mean that all German income becomes taxable in Switzerland.

The cantonal return and the German income tax return are separate procedures.

Different allocation of loan interest

In Switzerland’s international tax allocation, an individual’s debts and loan interest are generally apportioned in proportion to the location of their total assets. They are therefore not necessarily allocated entirely to the property securing the mortgage.

This Swiss allocation does not replace the German assessment of the actual use of the loan proceeds.

Consider the Swiss reform taking effect in 2029

The Federal Council has set 1 January 2029 as the effective date of the reform of residential property taxation. The maintenance cost deduction will remain available for rented or leased properties; deductions for private loan interest will be subject to new limits. The existing rules remain applicable for tax years 2026 to 2028.

Abolishing the imputed rental value for owner-occupied homes does not exempt actual rental income from tax. Letting and personal use must continue to be distinguished for mixed-use properties.

The Swiss perspective

Further information on cross-border situations and Swiss tax reporting is available from TaxRep Switzerland.

Explore Swiss tax guidance
Disposal

A sale requires a fresh tax assessment

Article 13(1) of the treaty permits Switzerland to tax a property sale. For a privately held rental property, the requirements of section 23 EStG must be assessed in Germany in particular.

The German ten-year period

If no more than ten years elapse between acquisition and disposal, the gain may be taxable in Germany. Depreciation previously claimed may increase the taxable gain.

After that period, an ordinary private property sale generally falls outside section 23 EStG. Business assets, commercial property dealing and special acquisition circumstances require separate assessment.

Swiss real estate capital gains tax

Swiss tax liability does not cease merely because the German ten-year period has expired. The tax calculation, holding period and possible tax deferrals are governed by the relevant cantonal law.

Where the gain is taxable in Germany, the credit for Swiss tax attributable to the same gain must be assessed. Without a taxable German disposal gain, Swiss real estate capital gains tax does not create a corresponding German refund entitlement.

A sale does not automatically allow previously accumulated rental losses under section 2a EStG to be offset. Letting and private disposal transactions are different categories of income.

Returns & supporting documents

Bring these documents together

The German income tax return generally requires Anlage V and, for foreign income and taxes, Anlage AUS. Where there are several owners, a separate and joint determination of income may also be required. Forms and competent tax offices depend on the tax year and circumstances.

1. Acquisition and building

Purchase agreement, ancillary acquisition costs, building/land allocation, completion date and depreciation previously claimed.

2. Letting

Rental agreements, income, service charge statements and records of vacancies and personal use.

3. Financing

Loan agreements, use of funds, annual interest and separately identified principal repayments.

4. Expenses

Invoices, payment dates, scope of renovations and classification as repair expenses or capital expenditure.

5. Swiss taxes

Tax returns, assessments, international tax allocation, payments and refunds, separated by type of tax.

6. German calculation

Net rental income calculation in euros, exchange rate records, depreciation schedule, foreign tax credit calculation and loss determination notices.

Still waiting for the Swiss assessment? The German return should nevertheless be filed on time with substantiated information. Missing evidence should be disclosed and supplied later. The procedural steps needed to secure a later credit or amendment must be assessed in good time; a final assessment cannot be amended without restriction.

Further guidance

Consider the property and tax returns together

Overview

Germany–Switzerland Real Estate

The main cross-border property ownership situations.

View overview
Ownership

Swiss Property Owned by a German Resident

Assessing ownership, use and cross-border taxation.

Read article
Reporting

Tax Returns & Reporting Obligations

Coordinating procedures and supporting documents in both countries.

Explore filing obligations
Legal framework

Official sources and case law

This overview concerns the standard case described. Ownership structure, personal tax residence, use, tax year and cantonal law may lead to different outcomes.

TaxRep

Assess the tax treatment of your Swiss rental property

We help you calculate income under German tax rules, assess the credit for Swiss taxes and coordinate tax returns in both countries.

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