The legislature repealed the Dumont practice in 2010 by expressly permitting the deduction, as maintenance costs, of ‘the cost of restoring recently acquired properties’ (art. 32 al. 2 LIFD). However, the Federal Court partially revived this practice – at least in spirit – by adopting an economic approach to confirming refusals to deduct renovation work which, due to its scale, was economically equivalent to new construction (‘wirtschaftlicher Neubau’). The Federal Court has recently reversed its case law (9C_677/2021 of 23 February 2023, intended for publication): in the case of a couple who had acquired a farmhouse to be renovated from top to bottom and who had been refused deduction of the renovation costs by the tax authorities, followed by the cantonal courts, on the grounds that they amounted to new construction, the Federal Court departed from its case law and essentially upheld the taxpayers’ appeal: it finally considered that it was contrary to the will of the legislator to adopt an overall economic assessment of a renovation project in order to refuse the deduction of costs which, considered individually and objectively, are indeed costs aimed at maintaining (and not increasing) the value of a building; it therefore referred the case back to the lower court for examination of the costs invoked by the taxpayers.
Our experts
