Swiss Federal Supreme Court, 11.03.2026, 9C_443/2025
Facts
A married couple, owners of a family home in the canton of Thurgau, demolished their existing conservatory, built in 1992, and constructed a new one between 2021 and 2022. The new installation is essentially identical in size and design to the old one. The foundations and floor slab were retained, and the existing blinds were removed and then reinstalled. However, the entire structure (wood, metal, glass walls and roof) as well as the flooring were completely replaced.
In their 2021 tax return, the taxpayers claimed actual property maintenance costs of CHF 49,047 for this work. The cantonal tax authority refused the deduction of these costs, granting only the standard flat-rate deduction. It took the view that the complete demolition followed by reconstruction amounted to new construction, the costs of which are not deductible as maintenance. This position was upheld by the cantonal tax appeals commission.
Upon appeal by the taxpayers, the Administrative Court of the canton of Thurgau overturned the appeals commission's decision. It ruled that the work did not constitute a replacement new construction and referred the case back to the tax authority for a reassessment, distinguishing between the portion of costs for maintaining value (deductible) and those for increasing value (non-deductible). The tax authority appealed this remand decision to the Federal Supreme Court.
Legal Analysis
The dispute concerns the classification of renovation costs for real estate with regard to income tax (Art. 32 para. 2 DBRA and Art. 9 para. 3 THRA). Tax law makes a fundamental distinction between:
- Maintenance costs (werterhaltende Kosten): These are intended to maintain the value of a property by restoring it to its previous state. These costs are deductible from taxable income.
- Value-enhancing costs (wertvermehrende Kosten): These improve the condition of the property, increase its value, or create new assets. These costs are not deductible from income (Art. 34 let. d DBRA).
In its landmark ruling BGE 149 II 27, the Federal Supreme Court abandoned the concept of "economic new construction" and clarified the method of analysis. Henceforth, for total renovation or conversion projects, each expense must be examined individually according to an objective, technical, and functional approach. The task is to determine whether the work in question restores a previous state (maintenance) or qualitatively improves the property (value enhancement).
However, this case law does not apply to replacement construction (Ersatzneubau). When an entire building is demolished and replaced with a new one, even for the same use, construction costs are generally considered value-enhancing investments rather than maintenance. There is no longer a pre-existing building to maintain.
The central legal question is therefore whether the complete demolition and reconstruction of an integral part of a building (such as a conservatory) should be treated as a renovation subject to detailed analysis (per BGE 149 II 27) or as a non-deductible replacement construction.
Application to the specific case
The Federal Supreme Court had to determine whether the reconstruction of the conservatory constituted a "replacement construction." It rejected the tax authority's arguments and upheld the analysis of the Cantonal Administrative Court.
The Federal Supreme Court emphasized that a conservatory is not an autonomous, independent building, unlike a detached garage (the subject of ruling 9C_653/2022). It is an annex ("Annexbaute") that only has meaning and utility when directly attached to the main building. Without the house, the conservatory would be open on one side and unusable.
Consequently, the demolition and reconstruction of this conservatory cannot be classified as a "replacement construction" of a building. The fact that all load-bearing elements and features of the old conservatory were replaced is not decisive. Rather, the operation must be viewed as a total renovation or transformation project of a part of an existing building.
This situation is comparable to the reconstruction of an economic part of a building (addressed in BGE 149 II 27) or the complete replacement of a roof (addressed in ruling 9C_442/2025 issued on the same day). In such cases, the case law established in BGE 149 II 27 applies fully.
It is therefore the responsibility of the tax authority, with the cooperation of the taxpayers (art. 126 DBG), to analyze each expense item related to the work on the conservatory. For each element (structure, glazing, flooring, etc.), it must be determined whether it is a simple replacement with an identical item (deductible maintenance costs) or a qualitative improvement (non-deductible value enhancement). If the value-maintenance portion cannot be established, the deduction is denied for the unproven amount, in accordance with the burden of proof resting on the taxpayers (art. 8 CC).
The referral of the case back to the tax authority for this detailed analysis is therefore deemed correct.
Outcome
The Federal Supreme Court dismisses the appeal by the Thurgau Cantonal Tax Administration. The decision of the Cantonal Administrative Court is upheld. The case is remanded to the tax authority to proceed with a new assessment for the 2021 tax period, for both direct federal tax and cantonal and communal taxes. The administration must examine the 49,047 CHF in costs in detail and allow the portion corresponding to value-maintenance costs as a deduction, while excluding the portion constituting a value enhancement.
Silex tax newsletter published in collaboration with Anna Vladau, Attorney at Law
