Buying a property in Switzerland – What you need to know!

2019 by FIRST. Swiss Made Home.

The spiritual home of winter sports and the heart of the Alps, for many people Switzerland is a dream location for a holiday home. But is this dream possible?

The short answer is "yes" but as a confederation of 26 Cantons – each with their own constitution, legislature, government and courts – Switzerland has a reputation as a complex and highly regulated property market.

To simplify things, we have boiled this down to the key facts you should know when considering buying a Swiss property:

  • Availability of Swiss properties to foreigners
  • What you can buy
  • Where you can buy and regional restrictions
  • Purchase process for a Swiss property
  • Purchase costs
  • Swiss property taxes

Can foreigners buy a property in Switzerland?

Yes, but there are restrictions imposed at a national, regional and local level on where and what foreigners may buy. Foreign property owners may occupy their property in Switzerland for up to six months per year.

You cannot buy a property in the name of a company in Switzerland.

In addition to this, whilst not restricted by law, if you are a United States citizen it is very difficult to borrow from a Swiss bank so unless you can buy without a mortgage you should consider buying in a French resort as French banks will still lend.

To live, work or retire in Switzerland you will need to apply for a residence permit and, once secured, the properties available to you and the purchase process will be different from that described here. Please contact us for more details. 

 

What can I buy?

Foreigners may only buy a residential property in a touristic area. So unless you are Swiss, or hold a Swiss Residence Permit, you cannot buy a property in Geneva, Basel, Zurich, Zug or any of the other cities in Switzerland. Foreigners are allowed to buy chalets and apartments in most Swiss ski resorts as these are in tourist areas.

Foreigners are able to buy in ski resorts in Cantons Bern, Graubünden, Obwalden, Uri, Vaud & Valais.

The Lex Koller (the Koller Law) established a permit system so only certain properties are eligible for foreign ownership and restricted the sale of properties with a habitable area of over 200m2 net to foreigners. Occasionally there are exceptions but this is a good rule of thumb.

More recently, the Lex Weber (the Weber Law) has prevented any building permits being granted for second homes in any communes where second homes already make up 20% of the property stock. Therefore, generally speaking, it is not possible to buy newbuild properties in Switzerland. There are a few notable exceptions, for example, where pre-Weber permits are still valid orwhere special dispensation has been granted by the commune. You can contact us for more details on these.

 

What is the buying process for a Swiss property? 

Make an offer - taking advice from an agent, you can make an offer for a property.

Sign a reservation contract - For renovations or new properties you will always be asked to sign a reservation agreement and pay a small deposit. This is increasingly common for resale properties too as a gesture of good will. The developer or vendor will countersign the contract and the property will not be marketed to other potential buyers for a period while you prepare your mortgage application and begin the purchase process.

Applying for a mortgage - Swiss banks will lend up to 70% of the purchase price. We can make several recommendations and only work with local mortgage providers who know the area and the market very well and can guarantee a smooth service with documentation in English.

Notary appointed - Once you have secured a mortgage offer, a Swiss notary will be appointed to manage the sale (acting on behalf of the purchaser and vendor). The notary is usually appointed by the agent who agrees the sale. We have a selection of preferred notaries in all the resorts where we sell, who provide documentation in English and offer an efficient service. You do not need a solicitor acting on your behalf (as in the UK) because the public notary acts on behalf of both parties.

Applying for a foreigner purchase permit -  The first step the notary will take will be to collect all the necessary information (the buyers’ personal info, the vendors’ personal info and the key information regarding the property) to prepare (1) an application for a foreigner purchase permit and (2) the deed of sale. The notary will send off the application for the foreigner purchase permit and this will need ratifying by the Cantonal Authorities. This usually takes 2-4 weeks and would only be refused if you already own another property in Switzerland or the property does not comply with the rules.

Signing the deed of sale - Once this permit has been secured, the deed of sale can be signed within 30 days (you can either be present with the notary for this or sign a power of attorney). The notary will also liaise with the bank for the registration of your mortgage.

Registration & handover - The sale will then be written into the Land Register. This will also take a few weeks, however, many vendors and buyers will agree to a handover of keys (and responsibility for the property) once the signing has occurred as the sale is then inevitable. However, the sale is only formally complete once it has been written into the land register.

It sounds complex but in actual fact it is very easy and we work with some very efficient, responsive local notaries to ensure minimum fuss for our buyers. 

Where a property was professionally rented before a sale, the new owners often pick up where the old owners left off and it is common for rental agreements to be transferred following a sale.

 

What are the purchase costs?

Switzerland is one of the cheapest countries in Europe to buy a property, and by far the cheapest in the Alps. In fact, according to Global Property Guide, only Latvia, Serbia, Ukraine, Macedonia, Slovakia, Albania, Norway, Estonia, Liechtenstein, Lithuania, Iceland & Denmark have cheaper purchase costs in Europe.

The total purchase costs are usually in the region of 2.5% to 3.5% (purchase tax, land registry fees & notary's fee) in most Cantons. Canton Vaud is the outlier with total purchase costs closer to 5%. All purchase costs are payable by the purchaser.

The mortgage registration fee is charged on a sliding scale which varies from Canton to Canton. In the Canton Valais the mortgage registration fee is 1.6% of the loan. In the Canton Vaud it is calculated on a sliding scale starting at 0.6% of the loan but decreasing to as little as 0.44% the larger the loan taken.

It is, however, possible to avoid paying the mortgage registration fee if there is an existing mortgage on a property. In this scenario you can request to take on transfer this mortgage “note” into your name and use as the mortgage/the basis for a mortgage on the property.

What taxes will I pay on a Swiss holiday home?

Foreigners owning a property in Switzerland pay taxes to three bodies - the Federal Government, the Canton, and the Commune. 

Below we have summarised the main taxes to be aware of at a federal and cantonal level. Communal/municipal taxes vary from resort to resort.

1) Income tax (rental)

Income is taxed at a federal, cantonal and communal basis regardless of whether you are renting your property or not. 

Property owners are taxed on a national income for the right to use the property. Based on the property itself and the state of the local rental market, a national income will be calculated for your property and will form the basis of the tax charged. Debts, mortgages and loans are deductible whether they relate to the property or not.

2) Property tax

Most of the cantons where foreigners are able to purchase a property without a residence permit charge an annual property tax in addition to income and wealth taxes. 

Based on the tax value of a property, the annual property tax is calculated as described below. 

 

Canton

Annual property tax (max)

Bern

                                               0.015%

Graubünden

                                               0.020%

Obwalden

                                                   -

Uri

                                                   -

Valais

                                              0.015%

Vaud

                                              0.010%

 

3) Inheritance tax

Another tax levied at the Cantonal level is the Inheritance tax. The inheritance or gifting of a property to spouses are tax free in all 26 cantons and the inheritance or gifting of a property to a direct descendant is only taxable in 4 cantons (Appenzell Innerhoden - 1%, Luzern - 2%, Neuchatel - 3% & Vaud - 3.5%).

Most countries have a dual taxation agreement with Switzerland so you do not pay your tax twice.

For more detailed tax advice on a specific property we recommend seeking specialist tax advice. We can put you in contact with local tax experts in all the major resorts.