Living without rent – how is that possible?

Who doesn’t wish they could live for free? Rent-free living sounds like every tenant’s dream. But unfortunately, it’s not as easy as it sounds. Because even if you rent out your home for free, you still have to pay taxes.

Here you can find out what is meant by rent-free living, how you can live rent-free in old age and whether you can invite family members to live with you rent-free. We also look at the preferential rent and the question of whether rent-free living is considered a gift.

What is rent-free living?

Rent-free or free living means renting out your own or rented property to someone else who does not have to pay rent. Even if the rent is significantly reduced, this can be referred to as rent-free living.

It is also rent-free living if you own a property and have already fully financed it. This is because you then live free of charge, but this does not mean that you have no costs or do not have to pay taxes.

The following options are available for rent-free living:

• Living in your own paid-off property
• Rent out your own property to relatives rent-free
• Invite lodgers or guests

How can I live rent-free in old age?

Home ownership offers great advantages, especially in the third stage of life. For example, rent-free living is an important component of retirement provision. In Switzerland, you can therefore pledge the second or third pillar of your pension plan in order to use the assets to buy your own home. Ideally, you will no longer have to pay for housing in old age.

Important: Pension fund assets are subject to strict restrictions in terms of use. They may only be used for the long-term promotion of real estate ownership. It is therefore only possible to use pension fund assets every five years.

One thing is certain: investing in your own property is a recommended option for retirement provision. Make sure that you are as debt-free as possible when you retire. Other important aspects are age-appropriate, i.e. barrier-free, planning of the property and a good reserve for any repair work on the property.

By the way: even if you have already paid off your property in full, you cannot live completely rent-free. This is because the so-called imputed rental value is treated as income by the tax office, which is why you have to pay tax – read more about this here.

Can family members live rent-free?

Rent-free living is also an option for family members. This is because many property owners rent out their property to friends or relatives at low cost or even free of charge. In doing so, they grant a so-called preferential rent. This is completely legal in Switzerland.

Please note, however, that in this case you risk having to pay tax arrears. This is because the Federal Tax Administration assumes that you have rental income in line with the market. This means that you will have to pay tax even on rental income that you have not received.

In each canton there are limits on how cheaply you can rent out the property without incurring additional tax payments. Therefore, find out about these limits when renting to friends or family for free and consider setting a low rent. In principle, the limit is 50% of the imputed rental value – if the rent is lower than this, tax avoidance is assumed.

The abolition of the imputed rental value is currently being discussed at federal level. However, this is still relevant for tax purposes – even for owner-occupied property without a mortgage.

Observe the following instructions to ensure that the rental to relatives or friends is correct:

• Conclude a proper rental agreement with the help of a lawyer.
• Refrain from only granting a right of use, as the tax office will quickly suspect a fictitious rental agreement.
• You may not demand any consideration for the preferential rent.
• Set a rent that is at least 50% of the imputed rental value.

How long can someone stay with me unannounced?

Another variant of rent-free living is to take someone into your home as a guest. In Switzerland, all tenants have the right to host guests without the consent of the landlord. This falls within the realm of privacy.

The maximum length of the visit is not specified. Animals also count as visitors. Nevertheless, in certain situations the landlord may object that the visitor has been living with you for too long and must therefore be registered.

The following rules are important for unannounced visits:

• Visitors must comply with the applicable house rules.
• The neighbors must not feel disturbed by the visit.
• The rented apartment must not be overcrowded.
• Close relatives may stay with you for several weeks, but should inform the landlord.
• Even if the tenancy agreement prohibits the keeping of animals, visitors may bring animals with them. However, if the animal stays in the apartment for a very long time, the landlord may impose a ban on visitors.
• Commercial visits are not normally permitted.
• The visit must not involve any danger or disadvantages for you or the other parties in the house.

The situation is different if you own a property. Then you can decide for yourself how long the visitor stays and how they should behave. However, remember that visitors must register when they have their main place of residence in your home. The rules on when to register vary from canton to canton.

Can I sublet my apartment for free?

If you take money from your visitor, this quickly becomes a subletting relationship. You must report this to the landlord. If you own your own property, you must report the income to the tax office. You are allowed to sublet rooms in your own property free of charge, but here too you may have to pay tax arrears.

In any case, you must ensure that you draw up a contract for rent-free living when renting to relatives and when renting the apartment to others free of charge. The following rules also apply:

• You may only use the apartment for its intended purpose and must therefore always respect your own tenancy agreement.
• Both you and the relatives to whom you let rent-free must use the rented property with care.
• Pay attention to the terms of use and the group of users in the rental agreement.
• Find out about the applicable regulations in your canton regarding unregistered accommodation and the conditions for rent-free accommodation

Is rent-free living a gift?

Rent-free living can also occur in the case of an inheritance. This is because many testators pass the property on to the community of heirs, who then have the right to use the property as their own. It is also possible for certain heirs to receive the right to rent-free living without owning the property.

If the testator specifically provides living space, the law stipulates that the inheriting children or other close relatives must be compensated. However, this only applies to gifts that serve as an endowment, i.e. a home given on the occasion of a wedding or when starting university.

If, on the other hand, the deceased leaves an apartment for rent-free living during his or her lifetime, this is not a gift, as it is not a reduction in the deceased’s assets. Although the testator could rent out his apartment and thus increase his income, this is not a concrete asset. The transfer of rent-free living space is therefore not to be classified as a gift requiring compensation.

Rent-free living is still considered proportionate if the testator grants the same benefit to his other children entitled to inherit. This does not have to take the same form, but must correspond to a similar value. Disputes within the community of heirs are normally examined on a case-by-case basis.

Would you like to be kept up to date on other real estate tips? Then click here to sign up for the properti newsletter! We share new blog articles and news from the real estate world with you so that you are always well informed:

All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.