On 28 April 2017, the Swiss Federal Supreme Court published two decisions scheduled for official publication as well as a media release concerning the deductibility of the early repayment penalty in the event of mortgage dissolution.

The two Federal Supreme Court rulings of 3 April 2017 (2C_1148/2015; Zurich case) and (2C_1165/2014, 2C_1166/2014; Neuchâtel case) concern the tax treatment of prepayment penalties incurred in the event of early termination of a mortgage.

Such early repayment fees are deductible as investment costs (Art. 12 StHG) in the real estate profit tax, provided that the dissolution of the mortgage is inseparably connected with the sale of the property (see 2C_1148/2015, E. 4.3.2. and 5.3.3 and E. 5.4 ff. ).

For income tax purposes, however, early repayment penalties can only be claimed as deductible debt interest if the cancelled mortgage is replaced by another one with the same lender (see 2C_1165/2014, 2C_1166/2014, E. 3 and E. 4 and 2C_1148/2015, E. 5.3.1 and E. 5.3.2).

A double consideration of the early repayment fee both for real estate profit tax and income tax is excluded in any case (cf. 2C_1148/2015, E. 4.1.2 and E. 5.2).

On 28 April 2017, the Federal Supreme Court published a media release on this subject entitled "Tax deductibility of the early repayment fee in the event of mortgage dissolution" (see also the article by Philipp Kruse on swissblawg, the article by Viktor Bucher and the commentary in the NZZ of 28 April 2017).