Buying and Selling Swiss Property – Tips for Non-Swiss Nationals and Non-Swiss Residents

An investment in Swiss property is no small task – be it your future family home, second home or a rental property to supplement your income, there are certain considerations that expats in particular need to bear in mind when looking to step onto the Swiss real estate ladder. Similarly, selling a property also comes with its own set of challenges. 

Navigating Legal Restrictions 

As a starting point, the legal limitations associated with purchasing property in Switzerland have to be considered. Are you able to make a purchase in the first place? There are strict restrictions on non-Swiss residents/non-Swiss nationals purchasing property in Switzerland, governed by the Swiss Federal Statute on Acquisition of Property by Non-Resident Aliens (ANRA, known as the ‘Lex Koller’). In accordance with Lex Koller, Swiss resident EU/EFTA nationals or non-EU/EFTA nationals with a permanent resident permit (C Permit) are typically able to purchase property without any issue. However, other nationals or EU/EFTA nationals resident in Switzerland without a C Permit need a licence from the competent cantonal authorities to purchase. For example, post-Brexit , British nationals without a C Permit will need Lex Koller authorisation to proceed with the purchase of a Swiss property. 

Each licence application should be carefully negotiated, and vary based on individual circumstances. For the purchase of a main home this is traditionally simpler, as it is only the number of second homes (i.e., holiday homes) sold to non-Swiss nationals which is subject to a national quota allocated between the cantons (and in certain cantons, the allocation is zero). Additionally, there is often more flexibility when purchasing in certain areas which are deemed more ‘touristic’; each case should be verified on an independent basis. 

What if you have inherited a property in Switzerland? The inheritance itself is not normally subject to Lex Koller restrictions, however careful thought needs to be put into future planning. Often, a community of heirs inherits a property from a deceased parent and wishes to sell; either to one of the heirs who will make use of the property, or to a third party. The practicalities of coordinating such a sale needs to be considered, particularly if from abroad and if there are multiple parties with perhaps some more actively involved than others.

The Purchase/Sale

You have identified a property, or found a buyer, and are ready to proceed with the next steps. Typically, a notary in the relevant canton handles the property transfer, acting neutrally for both the purchaser and the vendor where it is a non-contentious sale. They deal with every step, from holding funds in escrow to completing the official transfer documents and registering ownership changes at the Swiss Land Registry. Although the notary is usually recommended by the agents responsible for coordinating the transaction or known to the vendor and/or purchaser, independent legal advice is advisable to ensure the purchase/sales contract meets specific needs. For those who are not familiar with the Swiss land transfer system, having one ‘neutral’ notary (who is nonetheless typically funded by the purchaser) prepare the contract and represent both ‘sides’ is not something they are used to experiencing. It is often advantageous, whether you are buying or selling, to have your own representative engaged to draft or review the contract and to step in where necessary throughout the negotiation process. 

Sometimes, it is appropriate for properties to be bought or purchased by a corporate entity (for example, for tax or security reason) – typically, this is a Swiss real estate company established for this mandate. Occasionally, succession planning vehicles such as trusts can also come into the mix. Specialist advice is crucial to ensure the structure is beneficial and correctly implemented. 

Assistance with Financing 

Third-party financing (i.e., a bank mortgage) is often a key element, whether to assist with a purchase or addressing a repayment on sale. Tax advice should be sought, particularly if the lending originates from outside of Switzerland. It is important that the right lender is engaged, and advice is sought on the most effective structure for your circumstances.   

Ownership 

When purchasing a property, this is an important piece of the puzzle. Co-ownership in Switzerland comes in two forms: (i) joint ownership, whereby each individual has a defined share they can deal with on their own, or (ii) ownership in common, whereby the whole property belongs to several owners who must act unanimously. The overarching relationship between the owners in common determine how much of the property is owned by each individual – for example, a marriage contract or a community of heirs.. 

For both sole and joint owners, having a usufruct ownership arrangement over a property during lifetime may also a potentially very beneficial arrangement for some – particularly those with minor children for whom capital preservation is of particular importance, or for those who have children from different spouses or partners. 

Lifetime Taxes

Property ownership comes hand in hand with tax liabilities. Taxes on purchase include Swiss transfer tax and land tax. Usually, the purchase of a property in Switzerland does not have any direct tax consequences in other jurisdictions but this should be verified on a case-by-case basis. For example, for a British national, the purchase of a Swiss property will not incur any immediate UK tax charge but may have an impact on future property purchases in the UK in that they may incur a surcharge to UK Stamp Duty Land Tax as a result of multiple property ownership. Double tax treaties can offer relief in some cases.

During ownership, the property may be exposed to Swiss wealth tax, and also Swiss income tax on rental income (and in certain circumstances even if the property is not rented, based on a fictive rental value). Relief under an applicable double tax treaty may be available if another jurisdiction also seeks to tax rental receipts. There is also an annual Swiss land tax liability based on the fiscal value of the property. 

On a sale, Swiss real estate capital gains tax will be triggered, the rate depending on a number of factors such as how long the property has been owned. Again, relief under an applicable double tax treaty may be available if another jurisdiction also seeks to tax gains on a sale. 

On death, Swiss inheritance tax will be on point. Once again, an analysis of a double tax treaty may be necessary if another jurisdiction also seeks to impose inheritance tax on the basis of nationality or other connecting factors (although it is noted that Switzerland has concluded very few inheritance tax treaties in comparison to those for income/gains tax). 

Succession Planning

The form of ownership not only impacts your dealings with the property on an everyday basis, but it also has an impact on future planning. Succession planning is crucial; for example, co-ownership in particular has nuances which need to be considered to ensure that you can achieve your succession wishes – i.e., that the property can be inherited by those you intend in the event of your death in the simplest way possible.  

Thought should be given to having in place appropriate testamentary documents to address the succession of (your interest in) the property, as well as appropriate arrangements within said documents to ensure any inheritance is structured in accordance with your wishes. Cross-border situations (i.e., non-Swiss nationals) often require careful consideration to avoid conflicts between different jurisdictions’ succession laws (ie. who inherits) and tax rules (i.e., the fiscal impact), so as not to leave your executors / personal representatives faced with onerous complications to unravel on your death.

Take Switzerland and the UK for example. Switzerland and the UK have entered into a treaty dealing with double application of inheritance tax, but this treaty does not address the issues of jurisdiction or applicable law in cross-border UK/Swiss inheritances. The rules of the Swiss Private International Law Act (PILA) therefore apply: 

• Jurisdiction: In accordance with the PILA, the Swiss authorities are permitted to deal with the succession of a property in Switzerland. Heirs theoretically would have to act before the courts in Switzerland to deal with the property – but in practice, it is our experience that heirs can communicate separately with the Land Registry and provide documents such as an affidavit from the executors of the estate confirming the entitlement of the heirs to avoid having to enter into formal legal proceedings. 
• Applicable law: If the deceased is a Swiss resident at the time of death, the Swiss authorities will apply Swiss law to deal with the property except where an election for a different law is made in a testamentary document. Swiss succession law contains forced heirship rules (reserved, mandatory shares for spouses and children), and also has a series of rules between spouses which must be respected before settling an estate (i.e., the liquidation of the matrimonial property regime). 

Appropriate succession planning can assist with the above, and ensure that your executors/personal representatives are able to administer your estate in the most straightforward way. Typical considerations include matrimonial property regime elections, national law elections, entering into inheritance agreements with spouses and adult children and usufructuary planning. Tax advice should always also be sought.

Selling a property? Usually, your testamentary documents would not need to be updated but it is always a good time to review these to ensure that they remain appropriate, particularly if you have complex plans for the future use of the sales proceeds. 

Our Expertise in Geneva and Zurich 

No ‘one size fits all’ when it comes to property dealings. Understanding the legal pathway as well as your potential tax exposure and succession options is important, and tailored advice is recommended. At Charles Russell Speechlys, our experts in Swiss and UK property, tax, and succession law, based in Geneva, Zurich and Zug (including notarial services) can provide individuals and families with seamless cross-border advice for property transactions in Switzerland.  

For further information, please contact Sophie Hart and Grégoire Uldry.