Buying property in Switzerland
Acquisition of Real Estate In Switzerland by foreigners
- if you hold a Swiss residence permit (B, C, G or L) or not;
- the country of your origin (EU/EFTA national or not);
- the purpose of real estate usage (primary residence, holiday home or property for commercial/industrial use).
1. Types of Swiss residence permit
Permit B (temporary residence permit) – residence permit for a one-year stay in Switzerland, which can be renewed (EU/EFTA nationals: valid 5 years). With this permit you can buy residential real estate for your primary place of residence. Permit C (settlement residence permit) – permit granting full residence rights in Switzerland, which is obtained after 5 or 10 years, depending on one's nationality. With this permit you can change employers and jobs as you wish, become self-employed, live anywhere you like in Switzerland and buy as many properties as you wish. Permit L (short-term residence permit) – valid for up to one year, which can be renewed but only up to 24 months in total. It is usually linked to a specific job/company, and you do not automatically get a new permit if you change jobs. EU/ EFTA nationals with L permit and their domicile in Switzerland can buy a secondary residence. Permit G (cross-border commuter permit) – this permit is for those who work in Switzerland but live in another country. This is an annual permit that can be renewed each year. It does not grant you any residential rights and cannot be converted to a residential permit. EU/ EFTA nationals with G permit can buy a secondary residence within the area of their work in Switzerland without authorisation. Other residence permits: Permit Ci (for relatives of workers of inter-governmental organisations/foreign embassies); F (for provisionally admitted foreigners – people who have been ordered back to their home country but cannot leave Switzerland for some reason); N (permit for asylum seekers); and S (person in need of protection).
2. Acquisition of real estate in Switzerland by foreigners as a primary residence
EU/ EFTA nationals domiciled in Switzerland with permits B, C or L and non-EU/ EFTA nationals domiciled in Switzerland with permit C may freely acquire any real estate without restrictions (more than one of real estate of any kind). Non-EU/EFTA nationals with permit B can buy only one residential real estate as a primary residence in their actual place of domicile. It also can be a building land, but with the obligation to construct the building within one year of the purchase. The property must be bought directly on the buyer’s own name, and the owner must occupy the dwelling by himself. He cannot rent it out even in part. The living area may be of any size, but the plot should not exceed 3000 sqm, otherwise the authorization is required. If the buyer changes his place of domicile, he may purchase another home in his new place of domicile without having to sell the first one. He may use it as a secondary or holiday residence or rent it to third parties. However, the second bought property should be used as a primary place of residence. It is a violation of the law, if the buyer changes his place of domicile for the sole purpose of being able to purchase several dwellings without requiring authorisation. In such cases, the appropriate authorities can invoke authorization requirements.
3. Acquisition of holiday homes in Switzerland by foreigners
The acquisition of holiday homes in Switzerland by foreigners is regulated by the Federal Law on Acquisition of Real Estate by Persons Resident Abroad (LAFE), also referred as “Lex Koller” or “Lex Friedrich”, and in principle, subject to prior authorization. EU/ EFTA nationals with permit B, C or L and non-EU/ EFTA nationals with permit C are not subject to LAFE and can buy holiday home in Switzerland without autorisation. All foreigners domiciled abroad and non-EU/ EFTA nationals with permit B or L are obliged to receive authorisation LAFE to buy a specific holiday home in Switzerland. To obtain this authorization it is necessary to assign a local notary, who will apply for such an authorisation to the Cantonal authorities on behalf of the buyer. The procedure may take several months and the authorization will be granted if the following conditions are met:
- The holiday home must be located within specific tourist areas in the following cantons: Appenzell Ausserrhoden, Bern, Fribourg, Glarus, Grisons, Jura, Lucerne, Neuchâtel, Nidwalden, Obwalden, St. Gallen, Schaffhausen (for serviced flats only), Schwyz, Ticino, Uri, Vaud and Valais.
- The annual quota of holiday homes allocated for sale to foreigners in each Canton should not been exceeded. At present the total number of holiday homes that can be sold each year to foreigners in the whole Switzerland is 1’500. If a specific quota is exceeded, the foreigner needs to wait for an authorisation in the following year.
- As a rule, the net living area must not exceed 200 sq.m. (including kitchen, hall, bathroom, indoor swimming pool, sauna and hobbies room, but excluding cellar, balconies, stairs and attic) and the land area must not exceed 1'000 sq.m. However, it is possible to receive an authorization up to 250 m2 of living area and to 1’500 m2 of land area, proving the need in additional surfaces.
- Non-Swiss residents may buy in Switzerland only one property per family. Family is defined as husband and wife and /or under-age children. Over the age of 20, the son or daughter of the owner may purchase one property in his/her own name, provided he/she can prove his/her financial independence.
- Prohibition to resell the property within the first 5 years of ownership.
- Obligation to use the acquired real estate for at least 2 weeks per year during the touristic period. In Ticino it is from April till October.
- An owner or his family may occupy their property for up to six months per year with a maximum stay of 3 months per visit. If the owner wants to stay in Switzerland for longer than 90 days (3 months), he must apply for a Swiss residence permit, even he is EU/EFTA citizen.
- Prohibition to rent the property with long-term contracts. It means that holiday homes may not be rented on an annual basis but at most only periodically.
- Obligation to obtain the habitability of the property within two years from its subscription in the land register.
- Absolute prohibition to make changes in plans without a prior authorization of the appropriate authority.
4. Acquisition of Commercial Real Estate In Switzerland by foreigners
All foreign nationals, even those without Swiss residence permits, can buy commercial or industrial real estate in Switzerland for permanent business establishment purposes without prior authorisation (e.g. manufacturing premises, warehouse facilities, offices, shopping centers, retail premises, hotels, restaurants, workshops, doctors’ surgeries). In this case, the buyer can use it for his own business or rent/lease to a third party for commercial activity. Such real estate properties may also be purchased solely as an investment. The same applies to undeveloped land in industrial or commercial zones if the construction of building is undertaking within one year. Please, note, that the construction, rental or leasing of housing is not recognized as a permanent business activity and is prohibited (with the exception of subsidized housing). Only EU/EFTA nationals domiciled in Switzerland with permit B, C or L and non-EU/EFTA nationals domiciled in Switzerland with permit C can buy housing for investment purposes. Living accommodation run on a hotel basis is considered as a permanent business establishment and can be acquired or built without an authorization. In exceptional circumstances, living accommodation may be acquired without prior authorisation as part of a permanent business establishment when it is necessary for the business (e.g. for a caretaker or technician when permanent or almost permanent on-site presence is essential). Living accommodation may also be acquired as part of the purchase of a permanent business establishment if they are required to fulfill residential quotas under planning or zoning regulations. The consistent practice is also that living accommodation may also be acquired as part of such transactions if it is impossible in practical terms and unreasonable to separate this accommodation from the business site (e.g. house in the middle of a factory site or individual flats in a factory or a multi-storey). To summaries all information above, we provide the table below that summarizes the principle possibilities and restrictions of acquisition of real estate in Switzerland by foreigners.
5. Mortgages for the acquisition of real estate in Switzerland
As a general rule, Swiss banks grant mortgages of up to 80% of the property market value based on their own valuation. For luxury real estate and holiday homes, mortgage financing up to 60% is usually available. Current interest rates are approximately 2.5% fixed for 5 years and 3.9% fixed for 10 years. Flexi mortgages start from around 2.5%. In Switzerland, a distinction is made between the following types of mortgages:
1. Fixed-rate mortgageFixed-rate mortgages have a fixed interest rate for a fixed term and a fixed amount.
2. Fixed-rate mortgage with term start date in the futureA variation of the fixed-rate mortgage, whereby the mortgage interest can be fixed up to 36 months before the term start date.
3. LIBOR mortgageA mortgage for a fixed amount and for which the interest rate is linked to the LIBOR1. The development of the market inter- est rate is reflected in the mortgage interest. If the LIBOR rate is negative, a LIBOR rate of 0.00% will be used for calculation.
4. Adjustable-rate mortgageA mortgage with a flexible term and flexible amount, whereby the interest rate is continually adapted to the current interest level. We can provide you with further information on mortgages by introducing you to local Financing Expert.
6. Procedure for the purchase of real estate in Switzerland
6.1. Steps of the purchase procedure
1. After the buyer has chosen a property to buy, he should affiliate an official Swiss Notary who will act on behalf of both the purchaser and the vendor to complete the transaction. 2. The buyer should complete a civil status questionnaire and other documents stating the details of the purchaser and the property. 3. In the case if a foreigner buying a holiday home, the Notary will open a “LAFE” procedure for obtaining an authorization from Canton to purchase that particular property. In the case if a foreigner buying a real estate for a permanent residence, first of all it is necessary to obtain a Swiss residence permit B or C (see details on page Taking up residence in Switzerland). 4. Sign a letter of intent or a preliminary purchase agreement between the seller and the buyer, should a holiday home authorization or a residence permit be applied for. Usually agreed deposit or reservation fee should be paid to the Notary account. 5. Once the authorization LAFE or Swiss residence permit has been received, the buyer and the seller sign the notary’s Deed of Sale. As an option, for those buyers not wishing to travel to Switzerland to sign the Deed of Sale in person they can provide Power of Attorney to an appointed representative, usually from the Notary’s office in Switzerland, who will sign the document on their behalf. 6. The Buyer transfers the balance to the Notary’s account. 7. Once the Notary receives 100% of the property’s price he will record the deed of sale with the Land Register. 8. The Notary transfers the money to the Seller.
6.2. Documents necessary for the purchase procedureThe notary will need the following documents to legalise the purchase contract:
- Authorisation LAFE to purchase a holiday home by the canton
- Resident permit for main residency
- Confirmation of a Swiss bank for the financing of the purchase
- Passport of the beneficial owner
- Authorisation in favour of the notary to withhold transaction costs and taxes from the purchase price
6.3. Time frameDepending on the necessary applications, the purchase may be completed within 2-6 months. The ownership is only transferred with the registration of the new owner in the land register.
6.4. Purchase costs include:
- Notary fees
- Land registry fees
- Government purchase
7. Annual running costs and taxes for holiday homes
7.1. Annual TaxesForeigners owning a holiday home in Switzerland should pay annual taxes that vary from Canton to Canton. In Ticino annual taxes are about 1,3 % of the purchase price. This figure consists of several small taxes including land tax, tourist tax and wealth taxes. Also included is a tax on estimated rental income from the property regardless of whether or not the property is actually rented out during the year.
Taxes are paid to three bodies:
1. The Swiss Government (Federal tax) 2. The Canton (Cantonal tax) 3. The Commune (Communal tax)For apartments and property with shared areas/facilities the following also apply:
7.2. Annual running costs (around 0.5 % to 0.8 % of purchase price)Each purchaser acquires a share in the Proprietà per Piani (PPP), which means co-ownership by floor. The total annual costs of an apartment building are divided proportionately between the owners according to the size of their apartment. It is commonly estimated that the annual running costs of a building are about 0.8 % of the purchase price.
These expenses include:
- caretaker / social security contributions
- maintenance of building and materials
- water / gas / electricity and heating
- insurance and various taxes
- gardening and maintenance of roads
- administration fees and various expenses
- an allocation to the building's renovation fund