Is Lombard loan interest tax-deductible in Switzerland?

For a Swiss-resident private borrower, yes, within a cap, until the end of 2028: Lombard interest is private debt interest, deductible up to taxable investment income plus CHF 50,000. From 1 January 2029 it becomes deductible only in proportion to rented or leased Swiss property within total assets — so a borrower who owns no such property generally loses the private debt-interest deduction. The change comes from the reform that abolishes the tax on imputed rental value, the Eigenmietwert or valeur locative — a property reform that, as the Federal Department of Finance expressly states, also reaches the Lombard loan. This note states no tax rate, loan-to-value or pricing, and it is general information, not tax advice.

Is Lombard loan interest tax-deductible in Switzerland now?

Yes, until the end of 2028, for a resident individual whose securities are private assets: Lombard interest is deductible up to taxable investment income plus CHF 50,000. Within private assets, debt interest is a general deduction, not as a rule traced to what the loan pays for, so Lombard interest is treated like mortgage or consumer-loan interest.

The rule is Article 33(1)(a) of the Federal Act on Direct Federal Taxation — the DBG, or LIFD, SR 642.11 — which allows die privaten Schuldzinsen, les intérêts passifs privés, to be deducted up to the investment income taxable under Articles 20, 20a and 21, plus a further CHF 50,000; hence the shorthand Schuldzinsenabzug. The Federal Council’s explanations to voters in 2025 confirmed how broad it is: it covers mortgage interest, “but also other interest that has nothing to do with home ownership” (our translation). Practice does make exceptions where the use matters: interest on a construction loan counts as part of the property’s cost until it is ready for use, and interest on a debt-financed single-premium life policy can be disallowed where the arrangement amounts to tax avoidance (Federal Tax Administration Circular No. 22a of 31 January 2020, section 3.3).

Under Article 16(3) of the DBG and Article 7(4)(b) of the StHG, gains on movable private assets are tax-free, so a borrowed-money portfolio can produce taxable income and untaxed gains at once — the combination the Federal Department of Finance cited for extending the reform to Lombard loans. The capital-gains side is covered in the note on whether borrowing against shares triggers capital gains tax.

The current cap: investment income plus CHF 50,000

All private debt interest — mortgage, Lombard or other — counts against a single limit. The Federal Tax Administration — the ESTV, or AFC — explains in section 3.1 of the same circular that investment income counts gross, before costs and debt interest, but dividends from a holding of at least 10% of a company, which are only partly taxed, count only to the extent they are taxed. The CHF 50,000 is a single amount for a married couple assessed jointly.

The income that sets the ceiling is income from movable assets, such as dividends and interest (Articles 20 and 20a), and from immovable property (Article 21): rent and, until the reform, the imputed rental value of an owner-occupied home. The cantonal rule in Article 9(2)(a) of the Tax Harmonisation Act — the StHG, or LHID, SR 642.14 — has the same structure.

An illustration at federal level, in round numbers and with no rate assumed: a resident with CHF 60,000 of taxable dividends and interest in a year (none of it from a holding of 10% or more), and no real estate, can deduct up to CHF 110,000 of private debt interest. If the Lombard facility costs CHF 150,000 in interest, CHF 40,000 goes undeducted. Interest that far above the portfolio’s income would also fail the financing criterion of Circular No. 36, discussed below. How the interest itself is priced is set out on the page on interest rates and costs.

What changes when imputed rental value is abolished on 1 January 2029?

The link to investment income and the CHF 50,000 allowance both go. Private debt interest becomes deductible only in proportion to the share of total assets represented by Swiss real estate that the taxpayer does not keep for own use — in the official shorthand, rented or leased property.

The source is the Federal Act of 20 December 2024 on the change of system in the taxation of residential property — the Bundesgesetz über den Systemwechsel bei der Wohneigentumsbesteuerung — published as BBl 2025 23. The Act was not itself put to the people. Its referendum period lapsed unused on 19 April 2025, but it could enter into force only together with a linked constitutional amendment allowing the cantons to levy a special property tax on second homes used mainly by their owners. That amendment was accepted in the popular vote of 28 September 2025, by 1,579,379 votes to 1,156,598 (57.7%) and by a majority of the cantons (official result, BBl 2026 1165). On 1 April 2026 the Federal Council set entry into force for 1 January 2029 (AS 2026 213).

The new Article 33(1)(a) replaces the cap in the old letter, keeping its bar on interest on non-arm’s-length loans from a company to a significant shareholder or related person. It allows private debt interest “im Verhältnis aller in der Schweiz gelegenen unbeweglichen Vermögenswerte”, other than property available for the taxpayer’s own use, “zu den gesamten Vermögenswerten” — in our translation, in the ratio of all immovable assets located in Switzerland, excluding own-use property, to total assets. The Federal Council’s media release of 1 April 2026 put it more simply: debt interest remains deductible only in the ratio of the value of rented or leased property to total wealth.

The Federal Tax Administration’s fact sheet of 15 August 2025 shows how the ratio is built. The numerator is rented and leased real estate. The denominator is all movable and immovable assets; in the worked examples, debts are not netted off. Movable assets, a securities portfolio among them, count in the denominator and never in the numerator, and it does not matter which property the debt is secured on. In the fact sheet’s fourth example — an owner-occupied home worth CHF 800,000, a holiday flat for own use worth CHF 300,000, a let flat worth CHF 800,000 and CHF 200,000 in the bank — 38.1% of private debt interest remains deductible. Neither the Act nor the fact sheet states the valuation basis for the ratio or the date at which it is measured.

The two regimes side by side:

The table summarises statutory structure only; it implies no individual outcome.

Can a borrower without rented property still deduct Lombard interest from 2029?

Generally not. The Federal Tax Administration’s fact sheet says that people without taxable rental or lease income will in future be unable to claim any debt-interest deduction. With securities and cash kept out of the numerator, the ratio for a borrower whose wealth is a portfolio and bank balances is zero, however large the portfolio.

The Federal Department of Finance named the case in its questions and answers on the vote: debt interest on credit-financed investments in securities — “bspw. Lombardkredit”, for example a Lombard loan (crédit lombard) — can no longer be deducted unless there are rented or leased immovable assets. It also confirmed that the nature of the debt — mortgage, Lombard or consumer credit — does not matter.

Two provisions sit outside the ratio, but neither relieves the general cost of carrying a securities portfolio. The first-time-buyer deduction in new Article 33a of the DBG — up to CHF 10,000 for married couples and CHF 5,000 for other taxpayers, reducing by a tenth of the maximum each year over ten years — is limited to interest attributable to a first, permanently and exclusively owner-occupied home in Switzerland; no official guidance found explains how interest is attributed to that home where there are several debts, which is a point for an adviser. Interest on business debt stays deductible under Article 27(2)(d), which the reform does not amend, but whether a debt is a business debt follows the proven use of the funds and the facts discussed below.

A borrower who does own let Swiss property keeps a proportion of the deduction, applied to all private debt interest together and subject to the valuation questions above.

2028, the last tax year under the current rule

Under Articles 40 and 41 of the DBG the tax period is the calendar year and taxable income is measured by the income of that period, so tax period 2028 is the last assessed under the present Article 33(1)(a), with its CHF 50,000 allowance.

The statutes do not settle, on their face, how interest that straddles the changeover is treated, and no official guidance specific to the 2028/2029 changeover was found. That is a question for a tax adviser. So is any thought of altering a facility around the changeover; nothing here is a recommendation to repay, restructure or prepay.

Lombard debt and Swiss wealth tax: unchanged

Lombard debt still reduces Swiss wealth tax; the reform leaves this alone. There is no federal wealth tax. The cantons must levy one on individuals under Article 2(1)(a) of the StHG, on “das gesamte Reinvermögen” — total net wealth, assets less debts — under Article 13(1), measured at the end of the tax period under Article 17(1).

The Federal Act of 20 December 2024 amends Articles 7, 9, 9a, 9b, 12 and 78h of the StHG but not Article 13. A Lombard loan outstanding at the end of the tax period therefore still counts as a debt, subject to each canton’s rules and practice. From 2029 this leaves an asymmetry for a borrower without let property: the debt still reduces taxable wealth, while its interest no longer reduces taxable income.

Borrowing and the Swiss professional-securities-trader test

Borrowing against securities can weigh towards professional-trader status; whether it tips the balance depends on all the circumstances. The Federal Tax Administration’s Circular No. 36 of 27 July 2012 (Kreisschreiben Nr. 36, Gewerbsmässiger Wertschriftenhandel) sets out five criteria. Where all five are met, the authorities treat the activity as private asset management, with tax-free capital gains, in every case:

• Holding period — the securities sold were held for at least six months.
• Volume — purchases and sales in the calendar year total no more than five times the securities and cash held at the start of the tax period.
• Gains — capital gains are not needed to replace income for living costs, which the circular says is regularly the case where realised gains are less than 50% of net income for the period.
• Financing — the investments are not debt-financed, or the taxable income from the securities, such as interest and dividends, exceeds the proportionate debt interest.
• Derivatives — dealing in derivatives is limited to hedging the taxpayer’s own securities positions.

The fourth is the Lombard criterion: a facility that costs more in interest than the financed securities yield falls outside it. That is not a verdict. The circular says that where the criteria are not all met, professional trading is not necessarily present, and the case is judged on its circumstances under the case law of the Federal Supreme Court. Summarising the 1998 parliamentary debates, though, it describes the use of borrowed funds as the strongest indication of professional trading, and it says that where interest and costs have to be paid out of sale proceeds rather than periodic income, one can no longer speak of private asset management.

If the activity is professional trading, gains are taxed as income from self-employment under Article 18 of the DBG, with the further consequences that status carries, including social-security contributions, while business debt interest is deductible without the private cap. That follows from the facts; it is not an election, and nothing here suggests aiming for either outcome. Cantonal authorities generally apply equivalent criteria, though practice can differ. The reform does not amend Article 18, and because the financing criterion compares income with interest rather than asking whether the interest is deductible, on its wording it survives 2029. It is one of the questions the Switzerland market page lists for a Swiss tax adviser; whether leverage suits a portfolio at all is a separate judgement, discussed in the note on whether it is wise to use leverage when investing.

Non-resident Lombard borrowers

The reform usually does not reach a non-resident directly. Under Articles 3 and 6(1) of the DBG an individual has unlimited tax liability on tax domicile or residence in Switzerland. Otherwise, liability arises only through the economic connections listed in Articles 4 and 5 — a Swiss business or permanent establishment, rights in Swiss real estate, certain Swiss-source income — and under Article 6(2) it is limited to that income.

Borrowing from a Swiss lender is not among those connections, so a non-resident with no other Swiss link has no Swiss assessment in which the interest could be deducted; the question belongs to the home jurisdiction. A non-resident who owns Swiss real estate has limited Swiss liability, and how the new ratio operates within the allocation between countries is not addressed in any official source found, a point for Swiss advice.

The Swiss cantons apply the same rule from 2029

The new Article 9(2)(a) of the StHG applies the same ratio to cantonal and communal tax, counting immovable assets located in the canton rather than in Switzerland. Cantons must implement the harmonised rules for 1 January 2029, and as the Schwyz cantonal government noted in May 2026, where a canton is late, federal law applies directly under Article 72(2) of the StHG.

Cantonal choice is limited to keeping certain property deductions, such as for heritage conservation, and to levying the new tax on second homes. The debt-interest ratio is not optional. Anyone with let property abroad or in another canton should take advice on how it is counted: the wording refers to property in Switzerland, or for cantonal tax in the canton, and no official explanation found addresses the point.

What to settle with your own adviser

This note describes the statutes and official explanations as they stand at 28 September 2026. It is general information about Swiss federal and harmonised cantonal law for individuals, not advice, and the primary texts govern wherever a summary differs. Where the borrower is a company or another entity within a family structure, as described in the note on family offices and portfolio-backed credit, different provisions apply. Lombard Financing does not provide tax advice. The points most worth taking to a Swiss tax adviser:

• How much of your private debt interest, across every facility and mortgage, is deductible for each remaining tax period under the current cap?
• Do you hold Swiss real estate that is not for your own use, and how would it be valued in the ratio that applies from 2029?
• Where does your portfolio stand against the five criteria of Circular No. 36, as your canton applies them?
• If you are not resident in Switzerland, or own property in several cantons or countries, how do the ratio and the allocation apply to you?

The general starting point — a loan is not a sale — is set out in the note on the tax treatment of Lombard loans, and the Swiss market setting in Lombard loans in Switzerland. How content of this kind is sourced and caveated is explained in the editorial standards, and the legal position in the disclosures.