The gentleman’s lawyer on Swiss property

Dear Gentleman’s Lawyer,

I wonder if you could provide some advice about buying property in Switzerland?

It will be used as a holiday home but my wife and I have not ruled out the possibility of moving there permanently in the next few years.

Thank you in advance.

Christian

———————–

Dear Christian,

A lot of people have made good returns from investing in Swiss property since the new millennia. Making money by having a beautiful chalet is an attractive investment, however there are of course risks.

Unlike the other Alpine countries, Switzerland is not part of the EU. It is independent of the leash of Brussels and therefore can impose its own laws without another body looking over it.

Switzerland held a referendum in 2012, which passed law that prohibits new builds of second homes in communes where 20% or more of residential properties are already second homes. The real effect of this is that new holiday homes cannot be built in popular ski resorts due to the high number of second home properties already existing there.

The lower supply of second home properties has led to further restrictions to potential foreign owners by the government to ensure that Swiss residents are not priced-out of the market.

HOLIDAY HOME PERMITS AND SIZE RESTRICTIONS

As a foreigner looking to buy a holiday home, the first step is obtaining a permit. Switzerland has an annual quota limiting the amount of holiday home permits for foreigners to 1,500.

Although demand for these permits has lessened over the last couple of years, the demand still exceeds the quota, so make sure you apply as soon as you want to know you want to buy.

There are also size restrictions as to the plot of land and the habitable area of the chalet that the foreigner can buy. Therefore do not waste time looking at properties that are more than 250m2 (typically this is the maximum size allowed).

SPECIFIC CANTON LAW

The next step is to identify where you want to buy.

While your inner eye may be imagining yourself on the slopes and in the bars and restaurants of a particular resort, it is important to realise the specific regulations that each Canton, and each Commune within the Cantons has.

Gstaad, Saas Fee, Zermatt and Verbier are four Swiss ski resorts that are among the most popular for holiday home buyers, and I will therefore focus on the specific laws governing each for foreign buyers.

Gstaad (Canton: Berne)

• You are able to buy all types of property except for detached chalets.
• If you are buying an apartment, you will only be able to do so if no more than 50% of the apartments within that building are owned by foreigners.

Saas Fee & Verbier (Canton: Valais)

• You will only be able to buy a property if the seller is foreign.

Zermatt (Canton: Valais)

• Zermatt is no longer open for foreign buyers. Only Swiss nationals and residents are able to buy property in Zermatt.
• Nationals of a European Community or EFTA member country may buy a property if they have a B or C permit. Foreigners from all other countries may only buy if they have a C permit (see residency guidelines below).

In some Cantons foreigners are prohibited from re-selling their property with a certain period of time. In Valais, which includes Saas Fee, Verbier, and Zermatt, that period of time is 5 years from the date of purchase, whereas in Berne you are able to sell immediately.

RESIDENCY

Obtaining residency can change your situation.

Even if you own a property in Switzerland, you will only be able to spend up to 6 months in that property, and that is if you are a EU passport holder. To spend more than 6 months or become a resident, the person will have to apply for a B permit.

A B permit can be obtained one of two ways: (i) you are over 55 years old, you can prove that you have sufficient financial means not to become dependent on social security, and you have private Swiss health insurance cover, or (ii) you are employed by a Swiss company, establish your own Swiss company or are self-employed – the basic criteria to these is that you need to prove you are creating employment for Swiss nationals or have an annual income of over CHF 50,000.

Of course, this is all relevant as Swiss residency allows you to buy a property that foreigners are unable to buy, such as in Zermatt.

OTHER CONSIDERATIONS

Before and after purchasing, you should also be aware of some other restrictive laws.

Purchase Costs and Regulations

All purchase costs are payable by the purchaser, and include the notary’s fee, land registry fees and taxes. The rates of payments all vary from Canton to Canton, but they are typically always between 2.5 and 5% of the purchase price.

Also note that it is not possible for a foreigner to be able to acquire a property in the name of a company.

Taxes

Foreigners owning property in Switzerland pay taxes to the Federal Government, the Canton and the Commune. As you will no doubt be getting used to by now, the tax rates vary from Canton to Canton.

The tax paid is calculated by taking the notional rental income that would be generated were you to rent the property. 20% of that notional rental income is payable to the taxman. This rent is payable whether you rent the property or not.

The rate of the capital gains tax decreases with each year of ownership, starting at 30% (if you sell within a year) and decreasing to 9% after 10 year, and 1% after 25 years.

Rental Obligations

When you own a holiday home, you must use it for at least three weeks of the year.

Use includes that by friends or family, but does not include rental to others. This regulation is in place to ensure that the property is not let out on an annual basis.

Number of Properties

Foreigners may only buy one property per family. A family is defined as the husband, wife and any children from either parent under the age of 20.

Switzerland is a complicated country. For a start, it is a country that has four official languages for just over seven million people. The various local laws are tricky and the local notaries, lawyers, accountants and property agents often see foreign buyers as an easy way to make a little more money. Good local advice can be the difference between an expensive headache and a well planned and cost efficient purchase.

Whatever Canton you choose to buy in, all engagements should be carried out with great due diligence.

Good luck with your potential purchase, and please do not hesitate to contact me for more specific advice and recommendations.

All the best,

The Gentleman’s Lawyer

Please note that this article is intended to give the reader guidance of the law of England & Wales, and should not be considered as specific legal advice. By relying on the content of the article, the reader understands the risk that it may not be correct law related to their specific situation and that they will have no grounds for a negligence or misrepresentation claim against The Gentleman’s Journal Ltd or any other legal entity. Should you wish for professional legal advice specific to your situation, please contact The Gentleman’s Lawyer at lawyer@gentlemansjournal.com.