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Purchasing property in Switzerland

Purchase of real estate in Switzerland by a non-Swiss or non-resident person
A Introduction  
B Legal Restrictions  
C Purchase Costs  
D Construction guarantee  
E Purchase procedure  
F Mortgages  
G Terms of payment  
H Annual expenses  
I Financial considerations  
J Legal aspects  
K Inheritance tax and succession  
L Residency (B permits)  


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A – Introduction
Introduction
The Swiss restrict the sale of second homes to foreigners and have an annual quota of just 1,500 permits. Only properties in some cantons are authorised for sale to foreigners and then only in tourist resorts. Your notary will apply for a permit for you only as part of the purchasing procedure.

There are also restrictions on the size of the plot of land and the habitable area of the chalet. Usually the maximum will be around 200m2 net habitable but it is possible for foreigners to buy larger chalets if they have a Swiss B permit (see later).

Some Communes such as Saas Fee and Zermatt have strict planning laws and restrict the amount of new construction. The few new properties which are built in these resorts are usually only available for B permit holders. Each canton has slightly different rules and these rules may even vary from commune to commune within the same canton. Generally speaking, foreigners will have the largest choice of properties for purchase in the French-speaking part of Switzerland. The most liberal canton is Vaud which includes mountain resorts such as Villars where foreigners can buy virtually any property but they may not resell for 5 years. Less well known Cantons such as Obwalden (the resort of Engelberg) also have plenty of foreigner purchase permits and few restrictions. There are two types of restriction; legal restrictions (imposed by the Canton or local commune) and planning restrictions limiting new construction (imposed by the commune).
Canton Berne Canton Berne
Includes the resorts of Grindelwald, Lauterbrunnen and Wengen		  
Grindelwald permits foreigners to buy apartments and chalets but only if they have a market value of over around 750,000 Sfrs.

Wengen prohibits foreigners from buying detached chalets but they are permitted to buy apartments and there is no minimum purchaseprice. However, in each new apartment building 50% of the apartments must be sold to Swiss or B permit holders (foreigners with the rightof residence in Switzerland).

Lauterbrunnen also has a 50% rule.
Canton Vaud Canton Vaud
Includes the resort of Villars, the most popular choice for a second home or retirement		  
Villars has few restrictions: foreigners may buy most properties but may not resell for 5 years. Although Villars has sufficient permits for foreigners, there are not enough in the nearby villages of Barboleuese and Gryon and there you may have to queue for a year to get a purchase permit. If you are buying a new property off plan you will usually get your permit before the property is finished.
Canton Valais Canton Valais
Includes the resorts of Les Collons, Mayens de Riddes, Veysonnaz , Grimentz , Saas Fee, and Zermatt		  
Les Collons, Veysonnaz, Mayens de Riddes. In 2007 the state council of Valais imposed a moratorium for one year prohibiting sales to foreigners in certain communes. The reason forintroducing this moratorium was over-demand. In some resorts there had built up queues of 2 years or more to obtain a foreigner purchase permit so the state council stepped in and imposed a ban to allow the queue to be dealt with. This ban has now been lifted and it is now possible to buy in the Valais again. Canton Valais decided that of the 330 new permits to be allocated to Canton Valais they will allocate50% (165) to “touristic” projects where the buyer has an obligation to rent their property out through a tour operator. If a development obtains “touristic” status these could receive permits with the condition that the buyer makes the property available for rent.

Of the remaining 165 permits 40% (66) will be allocated to those buyers who are in the queue (having signed a notary’s purchase deed in the last 2 or 3 years but still not having received a purchase permit and therefore not yet registered in the land register). The remaining 99 permits will be allocated to new buyers in Canton Valais each year for new build second homes (no obligation to rent). A new rule now prohibits a notary from signing the official sales deed unless the developer has received a building permit from the Commune and also a foreigner purchase permit from the Canton. Foreigners are not permitted to resell within 5 years unless there are special circumstances such as ill health, financial problems, or buying a larger property. They may resell after 5 years to a foreign buyer or a Swiss without the need to apply for a special permit.

Saas Fee and Zermatt. Some of the communes where demand to buy property is the strongest have even stricter rules both to restrict new building and sales to foreigners. In Saas Fee planning laws restrict new construction to a total of just 1500 m2 per year (one apartment building and 2 or 3 chalets) and in each new apartment building in Saas Fee only one apartment may be sold to a foreigner. Foreigners may also buy an individual chalet but only one or two per year are authorised for construction and sale.

In Zermatt there are similar types of restrictions and even Swiss B permit holders are only permitted to buy an apartment for their own use if they are resident (and paying their taxes) in Zermatt. Otherwise, if you have a B permit and are living in Geneva you may buy in Zermatt but must rent your property out.

It is possible for a client living in the EU to applying for B permit as this enables them to buy a property in Valais immediately but these B permits are more difficult to obtain now and you are expected to spend at least 6 months of the year in Switzerland and pay your taxes there.
Canton Graubunden Canton Graubunden
Includes the resort of Lenzerheide near Zurich		  
Lenzerheide permits the sale of new apartments or detached chalets to foreigners but a foreigner may buy only one third of the properties so that in a typical apartment building of 9 apartments 3 may be sold to foreigners. A foreigner can buy a detached chalet only if it is part of a development of several chalets.
B – Legal Restrictions
Legal Restrictions
  1. Non-Swiss may only buy one property per family in Switzerland. Family is defined as husband and wife and /or under-age children. Over the age of 20, the son or daughter of an owner may purchase one property in his/her own name, provided he/she can provehis/her financial independence.

  2. In some Cantons foreigners may be prohibited from re-selling their property within a certain period after they have purchased it (10 years in Valais, 5 years in Vaud) and in other Cantons they may be permitted to re-sell theproperty immediately (Berne and Obwalden).

  3. Under Swiss Law, an owner or his family may occupy their apartment for up to six months per year. To spend more time inSwitzerland you would need to apply for a residence permit.

  4. The owner is free to rent their property (or not) as they wish. The owner, or his friends, or family, are supposed to use the property for at least three weeks of the year so the property may not be rented on an annual basis (maximum 11 months and one week).
C – Purchase Costs
The purchase of an apartment becomes valid once the owner is registered in the Land Registry. The purchase fees also vary from Cantonto Canton between 2.5 % and 5 % of the purchase price.

Canton Bern (Lauterbrunnen, Wengen and Grindelwald) total purchase costs amount to a total of around 3% of the purchase price, (Government purchase tax (1.8%), Notary fees (0.8%), land registration fees, registration of mortgage.)

Canton of Graubünden has sufficient foreigner purchase permits and no waiting list. Property transfer taxes (Handänderungssteuer) are around 2% and notary fees are around 0.5% so total sales costs are in the region of 2.5% of the sales price.

Canton Valais (Saas Fee, Les Collons, St Luc, etc) is one of the cheapest cantons for buying property and the taxes and notary fees together amount to a total of around 2.5% of the purchase price in total. Annual property taxes are cheaper too.

Canton Vaud (Villars) the total fees are 5% of the purchase price, being a one off property transfer tax of 3.3 % (similar to UK stamp duty) plus the Notary and land registration fees which total 1.7 %.

The cost for the registration of a mortgage varies in different cantons.

Canton Valais – the notary will charge 1.6% of the amount of the loan which will include registration fees.

Canton Vaud it is a sliding scale as follows:

  • Up to 100,000      0.6%
  • Up to 200,000      0.5%
  • Up to 300,000      0.47%
  • Up to 400,000      0.45%
  • Up to 500,000      0.44%
All these purchase costs are payable by the purchaser. When you come to sell, no Notary fees are payable.
D – Construction Guarantee
The federal construction guarantee is as follows:

  • 5 years for construction defects
  • 10 years for hidden defects
For resale properties, there are no guarantees.
E – Purchase Procedure
An official Swiss notary of the district will act on behalf of both the purchaser and the vendor. The Notary will draw up the deed of sale and all the documents required for the transfer of the legal ownership and he has a duty to protect the interests of both parties.

By signing a Power of Attorney, the purchaser owner entrusts the appointed notary's office with the duty of ensuring that all the legal formalities are respected, particularly the registration of the deed in the Land Register and releasing the acquired property from any previous mortgage.

All the preliminary payments are paid to the notary (i.e. the reservation deposit which is usually 10% or 15%) into his “client” account.

Once the client has chosen an apartment or a chalet he / she will complete a civil status questionnaire and a Power of Attorney, which states the details of the purchaser and the property. The power of attorney must be notarised if it has not been signed in the presence of the notary dealing with your purchase. You will need to take the power of attorney to a Notary Public (not a solicitor) in your country of residence to have your signature witnessed and (in the UK) the Notary Public will send the document off to the foreign office to have it “legalised” and then you will send it back to the notary.

Once the notary has received these completed and signed documents, plus the deposit and a copy of the purchaser’s passport, the notary will take the following steps:

  1. Proceed to the signing of the contract of sale
  2. Apply for the authorisation to purchase on behalf of those who are not resident in Switzerland
  3. To liaise with the bank for the registration of the required mortgage
Purchase procedure
As part of the purchase procedure the notary will request permission from the local canton and from the central government in Bern for the sale to be approved. In the Canton of Valais the notary may only sign the official deed of sale when a foreigner purchase permit has been pre-allocated to the purchaser to buy that particular property.

The property can only be purchased in the name of an individual or individuals.
It is not possible for a foreigner to be able to acquire a property in the name of a company.

Usually a sale to a foreigner will only be refused if the purchaser already owns another property in Switzerland. A contract can be made conditional upon the authorisation being granted and the process of obtaining the purchase permit is undertaken by the notary. In some cantons such as Bern (Wengen) it may take only a few weeks. In Switzerland both the purchaser and vendor are required to attend at the notary’s office to sign the deed of sale in his presence but usually both parties will sign a power of attorney which will authorise one of the secretaries working in the notary’s office to sign the sales deed on their behalf.

The notary will therefore send you a copy of the deed of sale in French or German with a professional English translation of this and a power of attorney (also in English) which authorises his secretary to sign this for you.

Conditions of ownership
The Commission Fonciere (Land Register) when authorising a foreigner to purchase will also impose certain conditions which include an obligation for the owner or his family or friends to use the property for 3 weeks of the year and a prohibition against renting the property for more than 11 months per year.
F – Mortgages
Mortgages
The standard loan granted by Swiss banks is 60 % to 65 % of the purchase price but we have a good relationship with a bank which may be prepared to lend up to 70%. This loan is usually granted in the form of a current account overdraft secured on the property. As interest is payable every quarter on the capital balance outstanding over that period, the repayments will be higher in the earlier years but will reduce as the capital is repaid. The repayment of the capital may often be over a period of 25, 33 or even 50 years. The rate of interest can be fixed or variable but are always low in Switzerland.
G – Terms Of Payment
Mortgages
If purchasing off plan you will be required by the developer to make stage payments as the construction proceeds. Each developer has a different payment structure but typically it would be as follows:

  • Upon reservation
  • Upon signature of deed of purchase
  • Upon starting the foundations
  • Upon erecting the roof ridge
  • Upon receipt of the keys
 20,000 Sfrs
10% (less the 20,000 Sfrs previously paid)
24 %
33 %
33 %		  
H – Annual Expenses
The total annual running costs for a property including all taxes and charges also vary from Canton to Canton.The charges and taxes fall into two categories:

1. Service charges:

The total expenses of an apartment building are divided up proportionately between the owners, according to the size of their apartment.These expenses include, the caretaker, maintenance of the building and grounds, communal water, gas, electricity and heating. In additionare structural insurance and various taxes, gardening and maintenance of roads (inc. snow clearing), administration fees and an allocationto the building's renovation fund.

The administrator collects the relevant amounts covering the total expenses incurred by the building. These are payable quarterly, half yearly, or yearly

2. Taxes:

Taxes are paid to three bodies - the Swiss Federal Government, the Canton, and the Commune. In addition to these direct taxes, there is aNational Defence Tax, a Land Tax, and a Tourist Tax (taxe de sejour).

The total of all these annual taxes varies from Canton to Canton. Local agents, or your Swiss bank, will be pleased to arrange to pay thesetaxes on your behalf. The tourist tax is 2.10 Sfrs per night per person for adults. Some resorts such as Wengen have specialarrangements for owners to use the car parks as these are pedestrian only resorts.

The annual taxes are based on the “rateable value” of a property, which is called the “estimation fiscale”. The annual property taxes are, ineffect, a tax on the notional rental income, which could be derived from the property and is the same whether the owner rents the propertyout or not.

There is no tax in Switzerland on rental income from a property owned by a foreigner unless you are resident in Switzerland.
I – Financial Considerations
1. Taxes on profit from real estate (capital gains tax):

In the case of resale, the property is subject to an appreciation tax. The purchase price is not indexed to the cost of living in Switzerland sothe taxable profit is the difference between the sale price and the total purchase price (including fees and special renovations orimprovements to the property). Deductions can be made for any commission due to the real estate agents and other costs. The rate of thecapital gainstax decreases with each year of ownership, starting at 30% (if you sell within a year) and decreasing to 7% if you have ownedthe property for 24 years.

2. Return on capital:

The principal source of profit for foreign investors has been the Swiss Franc, which has been, and continues to be one of the strongest ofthe world’s currencies. Swiss real estate has appreciated on a very steady basis. Prices fell in the early 90’s, but not nearly as dramaticallyas they did in the UK. The market has been rising again since the mid/late 90’s. As a generalisation, prices of detached chalet do tend togo up more than apartments and if you can buy a chalet where a tour operator is prepared to offer a guaranteed rent for the season thenthis can make a very good hassle-free investment.

3. Administration services:

Local agents can handle the administration and management of your property including checking, cleaning and maintaining the property,stocking refrigerators with necessary basics before arrival, restaurant and ticket bookings, payment of bills, insurance for householdcontents, baby-sitting and even car delivery to the airport.

4. Rental:

Rental can easily be arranged through a local agent, or a larger agency such as Interhome (which has 500 agencies throughout Europe) orthrough a tour operator in the UK, Germany, or Holland. Renting the property out when you are not using it, can provide sufficient incometo cover the annual running costs. Generally, tour operators will only give a guaranteed rental income ifyou are buying in a resort which isrelatively high and snow sure and has a long season. They prefer to rent chalets which are part of a larger development (rather than a oneoff property) and also favour developments which have additional facilities. Should you decide to let your apartment, then any rentalincome would not be liable for taxation in Switzerland but you may be liable to pay tax on such income in the country in which you areresident. This is the case in the UK, although you can off-set interest on a loan and other expenses against tax – see pamphlet IR150.
J – Legal Aspect
Legal Aspect
Apartments are organised as ‘Propriete Par Etage’ (PPE) -in effect each apartment is ‘freehold’ and the owner of that apartment has ashare of the whole building and its integral and communal parts and an exclusive right to use their own apartment.

All the apartment owners are bound together in a kind of residents association (known as a “co-propriety”), which sets out the rules of thehouse (e.g. the laundry room to be used only between certain hours). The owners have complete control over the building, but at theannual meeting they will appoint an Administrator who will deal with the day to day running of the property. The annual meeting will alsoset the budget for the forthcoming year, vote on suggestions made by the administrator and apartment owners, and review any problems.

A complete set of rules for co-ownership may be provided on request. Similar arrangements are made for a community of several chaletswhich will share costs and will be run on similar lines.
K – Inheritance tax and Succession
Legal Aspect
All properties in Switzerland are freehold and the purchaser has the right to transfer the property to his or her heirs by way of succession. Unless the purchaser becomes a Swiss resident then English law will apply, so the property will devolve in accordance with your English will. We would recommend that you have a separate will drawn up which deals specifically with the Swiss property. A copy of your will should be lodged with the Swiss notary. Death duties are payable in Switzerland but these are much lower than in the UK if the property is willed to direct line descendants. Inheritance taxes also vary between the Cantons and in Canton Valais (Verbier) there is zero inheritance tax. In Canton Vaud (Villars) the tax is progressive - starting at 1.8% for property valued at up to 500,000 Sfrs, rising to 4.3 % on property valued at over 500,000 Sfrs. If the fiscal value of the property is over 1m Sfrs, the tax is levied at a rate of 5.068%. If the property is registered in the name of more than one person, tax is payable only on the share of the property owned by the deceased.

However, as is always the case (in whatever country you may own property) where there is a dual taxation treaty, you would be liable to pay tax in the country in which you reside and be given credit for any tax paid to the foreign (Swiss) government.

It is highly recommended that you consult a notary regarding the Swiss law and to take in to account your rights in your country of origin.
L – Residency
Legal Aspect
The high standard of living, low crime figures, good health care, strong economy, low taxes and a position at the crossroads of Europe,have always attracted residents from other countries to retire or work in Switzerland. If an EU passport holder buys a holiday home inSwitzerland they will be permitted to spend up to 6 months a year in Switzerland without requiring any special permission. To spend morethan 6 months in Switzerland or to become resident there for tax purposes they must apply for a B permit.

On 1st of June 2002, the bilateral agreement between Switzerland and EU countries came into force and this has made it much easier forEU passport holders to work and/ or reside in Switzerland. There are two types of permit -a B permit which gives you the right to reside inSwitzerland (but not to work) or a permit which gives both the right to work and residency.

To work in Switzerland you will need a contract of employment from a Swiss company or you could establish your own company or be self-employed. Usually you will need to show that you are creating employment for Swiss nationals or you have an annual income of over50,000 Sfrs.

It is much easier to obtain a B permit (residence) on the basis that you are not gainfully employedand it is very easy to obtain if you areover the age of 55 but it is still possible to obtain a B permit if you are younger! You must satisfy the following requirements:

People who are not gainfully employed must have sufficient financial means for them not to become dependent on social security and aburden on the host country. They must have a private Swiss health insurance cover which covers all risks, including accidents (it costsaround 120 sfrs per month).

EC residence permits are valid for five years and will automatically be renewed by the competent authorities if the above-mentionedrequirements are still satisfied. In exceptional cases, the authorities may limit individual permits to two years if the holders' financial meansdo not appear to be secured.

If you obtain a B permit this would entitle you to buy a property which would otherwise not be available to purchase by a foreigner and youcan sign the deeds as soon as you receive the permit.

NON EU Passport holders will have their applications reviewed case by case but generally the requirements, if retiring, are to havereached retirement age (60 years old), not to work in Switzerland, to prove one has sufficient financial means to live in Switzerland withoutworking and to have personal ties in Switzerland such as family or a house.

A useful book if you are considering retiring or working in Switzerland is ‘Living and working in Switzerland’ by David Hampshire (available from Amazon).