Are you interested in purchasing a private residence (chalet, apartment, villa) or a commercial investment property in Switzerland? Swiss cities and mountain resorts offer a wide choice of real estate properties, so you can be sure of finding your heart’s desire among them. But how should you go about it if you are a foreign national? What are the conditions specific to the Swiss system? Here are a few tips to follow for a trouble-free property purchase in 2021.
Secondary and primary residences in Switzerland: What you need to know
As a foreigner, you have the possibility of buying a secondary residence in Switzerland. There are some fine properties on the market, whether in the lowlands or the Swiss Alps. Since January 2016, however, the federal law on secondary residences (LRS) has limited the building of secondary residences and imposed a maximum 20% municipal quota system. Therefore, you will need to check that the intended property is within a so-called ‘tourist zone’. Moreover, as the acquisition of properties by foreigners not resident in Switzerland is regulated by federal law (LFAIE), you must request a permit to acquire a secondary residence. Comptoir Immobilier’s teams can guide you through these various steps.
Before embarking on a purchase, you should note the following:
- Your secondary residence must be solely for private use. Letting is permitted periodically and for a maximum of six months per year.
- Only one holiday property may be acquired per family.
- The usable floor area must not exceed 200 meters squared (250 meters squared in some instances).
- The plot area occupied by a chalet or house must not exceed 1,000 meters squared (1,500 meters squared in some instances).
- Reselling your property is prohibited for five years except in the event of force majeure (e.g. illness or death).
In the case of a primary residence, the purchase of the property will be finalized after a residence permit (usually a Type-B permit) has been issued. The condition is that you must live and be domiciled in this residence. If you wish to build, the works must begin no later than one year after purchasing the plot. For foreign nationals, possession of real estate in Switzerland does not confer the right to a residence permit.
Lump-sum taxation for millionaires in Switzerland
Note that Swiss cantons can grant residence permits to non-European foreigners if they consider the tax revenue worthwhile. Geneva and Vaud require a minimum of CHF 312,522 and CHF 415,000, respectively, to be payable in taxes. To be entitled to this privilege, beneficiaries must live in Switzerland for at least six months a year. They must also forego engaging in any gainful activity. In return, thanks to the B permit obtained, they may travel freely in the Schengen area. Since 2008, 653 foreigners, the majority of them Russians, have benefited from this type of authorization. Such requests have been on the rise since the health crisis and lockdown—the ultra-rich look to our country for a certain level of security and high-quality healthcare infrastructure.
Finance and real estate fees in Switzerland
Swiss banks generally grant mortgage loans equivalent to a maximum of 80% of the property’s value as determined by their own valuation. In the case of high-end real estate assets and secondary residences, mortgages are, in principle, granted up to a maximum of 60%. This means that, in order to acquire your secondary home, you will need to have enough funds of your own available to cover 35% to 40% of the sale price, compared to 20% in the case of a primary residence. Opening a bank account in Switzerland is easy and requires the following documents: passport, tax return, salary certificate and debt certificate. The purchase, possession and sale procedures for real estate, and the tax regime applicable to it, are mainly governed by cantonal and municipal laws.
Investment properties in Switzerland
Commercial investment properties are also accessible to foreigners. They can be used to carry out a professional activity, or they can be let. There is no restriction on the location or number of properties acquired, and no residence permit or purchase license is necessary. The purchaser may buy in his or her name or through a Swiss or foreign legal entity. Before arranging a bank loan or putting your own money into the project, however, you should take the essential precaution of drawing up a simplified forecast of the expected rental income to ensure a rapid return on investment. To do this, you should take property taxes into account and avoid having the premises stand vacant. The forecast should also include future maintenance costs, such as bringing the property up to energy standards.
Formalizing your purchase of a Swiss property
The notary will ask for the following documents in order to formalize the transaction:
- A secondary residence purchase license issued by the canton.
- A residence permit (if a primary residence is involved).
- Confirmation of finance for the purchase from a Swiss bank.
- The future owner’s passport.
- A certificate authorizing the notary to deduct the fees and taxes associated with the transaction from the purchase price.
Upon receipt of the usual documents and payment of the down payment (15% to 20% of the purchase price), the notary will file a foreign purchase license request. It will then take between two and six months to obtain the license, although the time taken can vary considerably between cantons.