Deductibility regime in connection to the purchase of a condominium share

In ruling 9C_391/2023 (intended for publication), the Swiss Federal Court ruled that the compensatory payment made by the buyer of a condominium share to buy out the seller’s share in the condominium’s renovation fund is not deductible from his taxable income.

In this case, the buyer had acquired a condominium share for CHF 860,000. In addition to this amount, he had separately paid the seller CHF 10,000 to buy back his contribution to the condominium’s renovation fund. In the buyer’s view, this amount should be deductible from his taxable income, since it is comparable to a payment into the condominium’s renovation fund made directly by a unit owner, which would be deductible under art. 32 para. 2 of the Swiss Act on Direct Taxes and the Ordinance on costs relating to real estate. Indeed, the aforementioned provisions assimilate payments to a condominium’s renovation fund to maintenance costs, and allow them to be deducted at the time of payment, even in the absence of immediate renovation work.

In its ruling, the Federal Court denied that the compensatory payment could be equated with maintenance costs. It considers that the payment of CHF 10,000 is part of the consideration paid for the acquisition of a property and is therefore not deductible from the buyer’s taxable income.