Law on the tax valuation of certain properties (LEFI)

On 18 June 2023, the citizens of the canton of Geneva will be asked to vote on amendments to the Law on the Valuation of Certain Real Estate for Tax Purposes (LEFI). In the canton of Geneva, most property values for tax purposes are currently lower than the market value. This difference does not comply with federal law, which stipulates that the tax valuation of properties must be as close as possible to their market value. 
At present, the last individual valuation of non-rental properties (villas and condominiums) as a whole by expert committees ended in 1964. This valuation was valid from 1965 for a period of 10 years. This estimate has been renewed with linear increases, the latest being 7% from 2019. 

As mentioned above, at federal level, the law on the harmonisation of direct taxes (LHID) stipulates that property valuations must be as close as possible to the market value. This is not currently the case in the canton of Geneva. In order to comply with federal law, the new law provides for the following: 

• Indefinite extension of the validity of the tax valuation of properties  
• Initial increase of 12% on current valuations
• In the event of a sale, the purchase price becomes the new tax value, with annual indexation to the Geneva consumer price index capped at 1%;
• In the event of a gift or inheritance, the value used for gift or inheritance tax purposes becomes the new tax value, with annual indexation to the Geneva consumer price index capped at 1%. However, under certain conditions, there is an exception whereby the taxable value remains unchanged until the next individual valuation.

However, the new art. 4 LEFI provides for exceptions to the 12% increase in current estimates. This increase does not apply to the following tax values: 

• Tax value estimated by an expert on 31 December of the 11th year prior to the entry into force of the LEFI ;
• Tax value based on construction costs as at 31 December of the 11th year preceding the coming into force of the LEFI;
• Tax value of property transferred after 31 December of the 11th year prior to the entry into force of the LEFI;

Finally, the adjustment of the appraised value is suspended until the next valuation in the following cases: 

• In the event of inheritance, the deceased's main home having been allocated to an heir living in the same household in ownership or usufruct.
• In the case of a gift, the donor's main home having been allocated in ownership or usufruct to a donee living in the same household. 
• In the three cases described above, the suspension of the adjustment of the tax value remains valid as long as the heir, the spouse and the donee personally occupy the dwelling as their principal residence. 

At the same time, the following legislative changes are also planned to offset the impact of the 12% increase: 

• Reduction in the supplementary property tax rate for principal residences from 0.1% to 0.02% ;
• Reduction in wealth tax by 15%;
• Change in the rate of tax on property gains, from 0% to 2%, where a property has been held for 25 years or more.

This bill was passed by the Grand Council on 4 November 2022 and was the subject of a referendum. The people of Geneva will therefore be asked to vote on this bill in the referendum on 18 June 2023.