Definition of the replacement value for calculating the capital costs

When a profit is realized from the sale of property, it is taxed with the property gain tax. For this, the proceeds must exceed the investment costs. The legislator defines the acquisition costs as the purchase price or replacement value plus expenses. However, the interpretation of the replacement value is up to the cantons and is handled differently.

To determine the property gain tax, normally the original purchase price and expenses are deducted from today's selling price. If, however, the original purchase price is missing or the sale lacks a contractual significance (such as in the case of a simulated purchase price), the replacement value is used. However, the legislator has omitted to define this in order to provide the cantons with the necessary leeway. For example, in Basel-Landschaft, the replacement value is based on the market value from 20 years ago, unless a higher acquisition price can be proven. Other cantons, however, refer to the then (asset) tax value. In case 2C_540/2017, the Federal Court ruled on the legality of the interpretation of the replacement value in the canton of Lucerne. A taxpayer went all the way to the Federal Court because he had sold a property in 2014 for 705,000 Fr., and the local council attributed him a property gain of 537,743.10 Fr. The replacement value was set based on the cadastral value from 30 years ago at 100,000 Fr. plus a 25% addition to 125,000 Fr. The complainant argued that the old cadastral value of Fr. 100,000 was significantly below the market value as of November 14, 1984 (= 30 years before the sale of the property). Only with the revaluation in 1992 did the cadastral value of the property increase to Fr. 571,000. If based on the old cadastral value, the property would be greatly undervalued. However, he was of the opinion that not the cadastral value should be considered as the replacement value, but rather the market value should be the basis for the replacement value. He also relied on Art. 14 DBG, which states that assets are valued at market value.

The Federal Court did not follow this view. The legislator had deliberately refrained from defining the term "replacement value." The Confederation allows the cantons a certain, albeit limited, leeway in the definition of taxable profit. Thus, Lucerne was free to base the replacement value on the cadastral value of that time. Art. 14 DBG was also not applicable, as it is used for the assessment of wealth tax. For these reasons, the Federal Court dismissed the complaint.‍

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