Guide to Buying Property in Switzerland

Why buy a property in Switzerland?

  • Switzerland is popular among the international community for the sense of reliability, stability and security it offers, its quality of life, education and construction, and its position in the heart of continental Europe. Unsurprisingly this has led to great demand from overseas for Swiss residence or second homes.
  • This has led to restrictions of construction of second homes in communes where second homes already comprise over 20% of housing stock.
  • New developments which were granted a building permit prior to 11 March 2012 are being built but once this stock is finished there will be no more new-build second homes for Swiss or foreign buyers.
  • These new properties should therefore be a sound investment due to the lack of new second homes in future. The market will then solely be in existing resale homes, foreigner to foreigner.

What are the conditions of purchasing a property?

  • Foreigners are obliged to apply for a permit to buy a holiday home. These permits are allocated annually on a quota basis.
  • Foreigners are not permitted to buy in the major cities such as Geneva, Berne and Zurich and may only buy in certain Cantons and in certain tourist resorts.

What size of home can I buy?

  • Holiday homes may have no more than 250m2 of living space (not including garage, basement etc) on a land plot of no more than 1000m2. This is the equivalent of a spacious four bedroom chalet with balconies/terrace.
  • To purchase larger properties, it is possible for two siblings or parent/child (over 20 years old with own income stream) to purchase together (PPE).

Alpine Property Search have found the right property for us. What’s next?

  • Once you or your agent has found the property you would like to buy, your agent will refer you to a notary who works on behalf of both buyer and seller and is legally bound and professionally indemnified to conduct the sale fairly. The notary will apply to the Canton on behalf of the buyer for an Authorisation to buy.
  • For foreigner-owned resale property there is no need for the buyer to apply for a permit. The existing permit simply transfers with the property.

Can I sell the property to make a quick profit?

  • All purchases in Canton Valais require the owner to keep the property for five years before selling unless they can prove extreme circumstances such as divorce, bankruptcy, death of a family member or ill health, in which case the property can be sold at no more than the original purchase price. This rule is designed to avoid speculation and housing market bubbles.

What are the steps from making an offer to receiving the keys?

*Reproduced with the kind permission of Ski Invest

Can I buy more than one property?

Only one property per family may be purchased by non-Swiss residents. Children over 20 years old who can prove their financial independence may also purchase one property in their own name.

How long may I stay in my property per year?

A non-resident owner and his/her family may occupy the property for 6 months per year, maximum consecutive stay 3 months.

May I rent my property when not using it?

Yes. Your property cannot be rented on a full annual basis, the maximum being 11 months and 1 week. You, your family or friends are supposed to use the property for at least 3 weeks of the year.

May I purchase the property in the name of my company?

It is not possible for a foreigner to purchase a property in the name of a company.

I would like to buy a New Build Off-Plan

  • New build off-plan developments are usually paid in stages via the notary. The buyer signs a reservation agreement and pays a deposit. The bank will make the remaining stage payments as the construction proceeds (typically when the foundations and roof are started) with the final payment taking place after a satisfactory snagging inspection has taken place.
  • New build construction carries a 5-year guarantee for construction defects and 10 years for hidden defects.

Can I get a mortgage?

  • Local banks will lend up to 70% of the property value depending on your financial circumstances. Higher Percentage LTVs are possible if you invest your assets with the bank.
  • Interest rates are the lowest in the developed world and banks will lend for ten years at fixed rates below 2%.
  • A Swiss mortgage (both variable and fixed rates available) is effectively an overdraft secured against the property with the borrower paying interest on the capital every quarter.
  • Capital repayments can be made for up to 25 years and are paid annually.

What are the Purchase costs?

  • Costs of purchase vary depending on the Canton. In Valais you will pay 2.5% comprising of notary fees, land registry fees and government purchase taxes. In Vaud this is 5%.
  • In addition, there is a mortgage registration fee payable. In Valais this is 1.6% of the loan value. In Vaud it is based on a sliding scale from 0.44% to 0.66%.

What are the running costs?

Annual running costs are around 0.75% of the purchase price and should easily be covered if the property is rented out when not in use.

What about Taxation?

Property Tax: Sometimes known as land or real estate tax, this is a cantonal or communal tax on land and buildings. It is payable by persons who are recorded in the land register as the owners or users of a property. The rates range from 0.05% to 0.3% on the full taxable value of the property, i.e. without taking account of any related debts or mortgages. The property is taxed at its location irrespective of where the owner lives.

Swiss Tax on Rental Income: Rental income is taxable. Nevertheless, administration costs invoiced by third persons, necessary maintenance and improvement costs, as well as interest payments in respect of loans, are deductible. This type of tax can also apply to non-residents.

Rental Value Tax: All homeowners in Switzerland must pay an income tax on their home. This tax is called the Rental Value Tax and is calculated by determining how much rent the home would theoretically yield if rented out. At the same time, you can deduct mortgage interest payments and other costs for the upkeep of the property.

Capital Gains Tax: Profit on the sale of a property is subject to a capital gains tax to reduce speculation. The rates are usually progressive and the longer the property is owned, the lower the tax rate. A shorter owning period means a higher tax. The computation for the taxable gains is the selling price, less acquisition costs and costs of improvement. Therefore, it is very important to keep all the receipts you have relative to your property as they may save you money in the future!

Double Taxation: If you live outside Switzerland, then normally you should not pay tax in your country of residence on a property situated in Switzerland. This however depends on the Double Tax Treaty between Switzerland and your country of residence. The principle normally followed is that property is taxed in the country where the property is situated.

Inheritance tax: All properties are freehold and therefore can be passed to direct descendants. In Canton Valais there is no inheritance tax payable, though you will be liable to your local country rate of taxation.

Disclaimer:

The information herein has been provided in good faith as a guide. However, regulations, tax rates and exemptions may change. APS accepts no responsibility for its accuracy and buyers should always consult the lawyer handling the purchase for clarification and guidance.

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