Buying Property in Switzerland - Purchase Procedure for non-Swiss

Some quick answers

The purchase of real estate in Switzerland by a non-Swiss or non-resident person.

In order to be able to reside in Switzerland beyond a continuous 90-day period, a non-Swiss citizen is required to obtain a residence permit.

There are different types of permits available, depending on what the individual’s requirements are.

Typically, the majority of persons from abroad will apply for a renewable B permit that allows them to live in Switzerland and if they wish to, also work.

The advantage is that a B permit holder will be allowed to purchase any piece of property without having to apply for a separate permit. EU persons are also allowed to purchase in addition to their domicile home additional homes that would not be used as primary domicile but e.g. as vacation homes, e.g. an apartment in Ticino for the summer and a chalet in Valais for the winter vacation.

A - Purchase conditions
B - Legal restrictions
C - Cost and legal formalities
D - Guarantees
E - Purchase procedure
F - Financing
G - Purchase security
H - Terms of payment
I - Annual expenses
J - Financial considerations
K - Legal aspects

A. PURCHASE CONDITIONS

The sale of real estate to non-Swiss citizen is subject to several laws. The actual law is named « Lex Friedrich ». Each canton has a yearly quota of properties authorised for sale to « non-Swiss ». This law came into effect on the 1st January 1985 and is a modification of the "Lex Furgler". Its goal is to control the purchase of properties in Switzerland by non-Swiss citizens.

An authorisation to purchase must be obtained from the Cantonal Authorities and from the Federal Department of Justice and Police, through a Notary (in Switzerland they are Public Officers).

B. LEGAL RESTRICTIONS

Non-Swiss may only buy one property of maximum 200 square meters of habitable space per family in Switzerland : family defined as husband and wife and/or under-age children. After the age of 20, the son or daughter of an owner may purchase one property in his/her own name, provided he/she can prove his/her financial independence.
Subject to the restrictions under the « Lex Friedrich », it is now once again possible to resell an apartment after its acquisition to another non-resident. All applications for resale must be made through a notary's office, once a buyer is found. If the resale is immediate it should not look like a speculation to the authorities.
Under Swiss Law, an owner or his family may occupy their apartment for up to six months per year. (Twice three months)
The accommodation cannot be rented on an annual basis (maximum 11 month and one week) as an owner is supposed to use his property for at least three weeks of the year.
No authorisation is required for the purchase of a principal residence if the buyer has a permit of residence B. (except if the land has more then 1'000 sqm).
EU citizens with a permit of residence B and all foreigners with a residence permit C can buy as many properties as they want.

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C. COST AND LEGAL FORMALITIES

The purchase of an apartment becomes valid once the owner is registered at the Land Register.

The purchase fees amount to a total of
Cantonal + Communal transfer fee :
Notary and registration fee : 2.5 % (Valais)

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

All the preliminary payments must be made to the notary (i.e. the reservation deposit) into his « clients » deposit account.

D. CONSTRUCTION GUARANTEE
(for new buildings only)

The federal construction guarantee is:
- 5 (five) years for construction defects
- 10 (ten) years for hidden defects

For re-sales properties, there is no guarantee.

E. PURCHASE PROCEDURE

Once the client has chosen an apartment or a chalet, the procedure is as follows:

He completes a civil status questionnaire.
He completes a declaration on the honour.
Then he must fill out a Power of Attorney which states the following:
- the name and full address of the purchaser,
- the location and name of the chalet, the number of the apartment and floor it is on,
- the number of the parking space (if applicable),
- the detailed selling price:
  - price of the apartment
  - price of the mooring place
  - price of the parking space
  - = Total sale price
- the schedule of payments, as a percentage of the total sale price, corresponding to the extent of the works.
Copy of his/her passport, signed.

The signature on the power of attorney and on the copy of the passports must be legalized.

The above documents are normally completed with the help of our parrtner company and then forwarded to the official Swiss notary who begins the purchase procedure.

Once the notary has received all these completed and signed documents, plus the deposit, he will take the following steps:
1. Proceed to the signing of the deed of sale.
2. Apply for the authorisation to purchase on behalf of those who are not resident in Switzerland.
3. With the help of our prtner company, apply for the required mortgage.
The administrative time taken to obtain the authorisations is usually two to six months from the date of the submission of the application.

Once the authorisation has been received, the Notary will duly record the deed of sale in the Land Register.

F. FINANCING

The standard loan granted by Swiss banks for purchases is about 66 % of the sales price (incl. parking space). This loan is usually granted in the form of a debit to a current account and only the property qualifies as security.

Traditional financing through a mortgage can also be arranged. The interest in this case is lower but the account is not as flexible in its use as the current debit account.

The rate of interest is fixed in stages and can vary depending on the state of the Swiss economy.

A larger mortgage can be arranged on the basis of additional security/guarantees (shares, gold, etc.).

G. PURCHASE SECURITY

An official Swiss notary will act on behalf of both the purchaser and the vendor. He draws up the deeds and documents required for legal ownership and is there to protect the interests of both parties.

It is a notary of the district who will act on behalf of the vendor and the purchaser.

H. TERMS OF PAYMENT (for a new-build property)

Upon reservation 34%
When the roof is built 33%
Upon receipt of the keys 33%
TOTAL 100%

I. ANNUAL EXPENSES

Co-ownership charges (for an apartment):

It is commonly estimated that the annual running costs of a building are about 0.8 % of the purchase price.

These costs are divided up proportionately between the owners, according to the size of their apartment.

These expenses include:
1. caretaker / social security contributions
2. maintenance of building and materials
3. water / gas / electricity and heating
4. insurance and various taxes
5. gardening and maintenance of roads
6. administration fees and various expenses
7. an allocation to the building's renovation fund
8. etc.

The manager (of the co-owned property) collects the relevant amounts covering the total expenses incurred by the building. These are payable quarterly or half-yearly.

2. Taxes: (amount to about 1,3 % of purchase price p.a.)

Taxes are paid to three bodies:

The Swiss Government
The Canton
The Commune

The rental value is equivalent to the amount the owner would pay for renting a similar property. This constitutes the basis of the income tax.

In addition to these direct taxes, the following also have to be paid:

National Defence Tax
Land Tax
Tourist Tax

J. 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. As the purchase price is not indexed to the cost of living in Switzerland, the taxable profit is the difference between the sale price and the purchase price total: (purchase price + purchase fees + possible increase in value (special work carried out or renovations made) + any commission due to the real estate agents + other costs).

The rate of the capital gain tax decreases according to the years of ownership. Please click here for the rates.

2. Returns

To date (and the figures justify this), the principal source of profit for foreign investors has been the currency 'hedge' of the Swiss Franc.

It has allowed the initial capital:

to be protected from depreciation
to increase in value (profit - speculation)
to protect itself against inflation
to be self-managing by net return

Finally, the most important and less quantifiable return is the pleasure you will have from using your property and the enjoyment gained from the security and tranquility of Switzerland.

K. LEGAL ASPECT

The « Propriété Par Etage » (PPE) means co-ownership by floor. The co-ownership is a legal right which consists of two inextricably linked elements:

a share of the whole building and its integral parts (totality of the property/walls/balconies/fences/concrete and floor/roof covering and plumbing/common parts, etc.)
an exclusive right to use your defined parts of the building (your apartment and garage if applicable)

The building is divided into shares and measured in oo/oo (thousandths). The administrative « control » of the PPE co-property is exercised by the co-owners' annual general meeting. A complete set of rules for co-ownership may be provided on request.

Death duties

This depends on whether the specific case involves direct descendant heir or not. In the Canton of Valais it is particularly appreciable that there is no inheritance tax for the specific case on direct descendants.