Today two different systems can be identified:2
- St. Gallen system
- Zuricher system.
The St. Gallen system only charges property tax on real estate held in the form of private assets, agricultural real estate and the real estate gains of property dealers located outside of the Canton. Otherwise real estate gains
are accounted for in ordinary income tax or corporation tax.
The Zurich system subjects all gains realized on immovable assets to real estate gains tax; hence it charges real estate gains tax on private and business assets. Real estate gains in respect of business assets and legal entities are taxable as profits in the context of ordinary income tax or yield tax, where purchase price and value-adding expenditure, including construction credit interest, exceed the value of the gains tax (§§ 18 Clause 4 and 64 Clause 3 of Zurich tax law [StG ZH]). Due to this peculiar formulation of recovered amortisation in the tax law, amortisation previously allowed by the tax office does not need to be substantiated. The law therefore assumes that the difference between the value of income or gains tax and the (higher) investment costs according to real estate gains tax represents the property gain subject to state taxation.
2 The Zug system, which was valid until the end of 1990, was almost identical to the Zurich system; however it reduced double taxation on the real estate gains of persons and property dealers subject to obligatory accounting by allowing cantonal and local authority taxes raised on book profits to be offset against local real estate gains tax. As of 1 January 1991 the Canton of Zug changed to the Zurich system and as of 1 Janaury 2001 now operates the St. Gallen system.