Deduction of brokerage commissions for property gains tax purposes
Following a recent decision by the Cantonal Court of Lucerne, there has now been a change in practice, according to which brokerage commissions can now be deducted in full, provided certain criteria are met. We would like to explain what these are below.
Definition of brokerage commission
In the case of brokerage, a basic distinction can be made between brokerage by reference and brokerage by commission. In the case of brokerage, the broker informs the client of one or more opportunities to buy or sell. Specifically, the broker's activity consists of naming interested parties. Brokerage goes beyond this and requires the broker to actively promote the conclusion of a contract, e.g. by drafting contracts or participating in negotiations. The performance-related fee - usually in the form of a commission - arises upon conclusion of the proven or brokered transaction. A brokerage contract valid under civil law can be concluded verbally or in writing. For reasons of proof, however, the written form is recommended.
Tax deductibility and change in practice in the canton of Lucerne
In order for a broker's commission to be deductible for property gains tax purposes, the following conditions must be met cumulatively:
- The existence of a valid brokerage contract under civil law with a third party,
- a brokerage or brokerage activity by the broker leading to the conclusion of a purchase contract,
- payment of the brokerage fee owed.
Representation does not fall under the brokerage activity and is therefore not deductible. This is the case if the agent carries out the sale in place of the principal on the basis of a power of attorney.
If the aforementioned criteria were met, brokerage commissions could previously only be deducted up to a certain percentage as expenses when calculating property gains tax. Since the cantonal court ruling of June 29, 2023, these costs are now generally deductible without limit. However, an unlimited deduction is subject to the condition that the agreed remuneration corresponds to the usual, market-based remuneration that would have been agreed between uninvolved third parties (third-party comparison). In addition to the brokerage commission paid, any other costs invoiced in connection with the brokerage activity - such as sales documentation or advertisements - can also be deducted.
However, if brokerage commission is paid due to unusual or personal circumstances - e.g. due to family relationships or a relationship of dependency - a reduction is made.
relationship - the deductible costs are reduced. In such cases, the deduction is calculated as a percentage of the sale value and amounts to a maximum of 3 percent for developed properties and 4 percent for undeveloped properties (plus VAT).
Situation in other cantons
The deductibility of brokerage commissions as expenses when calculating property gains tax is not regulated uniformly throughout Switzerland, which is why the cantons have a certain amount of discretion and different legal regulations apply.
In most other cantons, the deduction of standard brokerage commissions is limited to around 2 to 3 percent of the sale value. In some cases, higher deductions of up to 5 percent are permitted for undeveloped properties.
In conclusion, it can be summarized that in the canton of Lucerne - in contrast to other cantons - brokerage commissions can now be deducted as expenses for property gains tax without limitation if the necessary criteria are met, which can lead to a reduction in property gains tax.
