Philippe Kenel

 

How to acquire real estate in Switzerland?

 

Philippe Kenel, doctor of jurisprudence, attorney-at-law in Lausanne, Geneva and Brussels, Python & Peter

 

Unlike the situation in many countries, since the early 1960s Switzerland has had legislation that imposes a number of conditions on the possibility for foreign nationals to buy property in Switzerland. The current law is called Lex Koller, named after the last Federal Councillor who amended it. While, as we explain below, this law already sets very strict requirements, the situation was further complicated on 11 March 2012, when the Swiss electorate approved an initiative intended to limit the number of second homes to 20% in each municipality. The legislation resulting from this vote is called Lex Weber, named after the famous Swiss environmentalist who was behind this initiative.

 

Under Lex Koller, a foreign national – regardless of nationality – domiciled outside Switzerland can essentially buy three types of property:

 

  1. Buying a holiday home

 Buying a holiday home is subject to the following conditions:

  • The property must be located in a municipality included on the list of tourist municipalities issued by each canton (there are none in the canton of Geneva);
  • The net surface area shall, in principle, not exceed 200 m2; for holiday homes which are not subject to the regime of condominium ownership, the total area of the land-plot shall, as a general rule, not exceed 1,000 m2;
  • A cantonal quota unit must be available;
  • A holiday home must be acquired in the purchaser’s own name.

 

  1. Buying a second home

The cantons may provide that a foreign national domiciled outside Switzerland may purchase a second home in a place where he or she maintains extremely close ties worthy of protection. The cantons of Vaud and Valais, unlike that of Geneva, have made use of this option. We emphasise that the authorities are very strict about the interpretation of the concept of “extremely close ties”. According to the Federal Council, this must involve regular contacts that the purchaser maintains in the place where the property is located to protect overriding interests of an economic, scientific, or cultural nature, or other significant interests. Kinship or marriage with persons residing in Switzerland, as well as holiday stays, therapy, education or other temporary stays are not, in and of themselves, close ties worthy of protection.

 

  1. Buying a commercial property

A person domiciled abroad may acquire commercial property in Switzerland without restrictions. The property may be used either for a business or may be let out. There is no restriction as to the location of or the number of properties acquired. Similarly, buyers may buy property in their own name or via a Swiss or foreign legal structure.

 

The adoption by the Swiss electorate of the Weber initiative on 11 March 2012 has further complicated the situation of foreign nationals wishing to purchase a second home in Switzerland. The day after the adoption of this initiative, the question arose as to whether the 20% limit was effective as of 12 March 2012 or 1 January 2013. On 22 August 2012, the Federal Council promulgated an Ordinance on second homes that established as a matter of principle that the 20% limit would come into force only as of 1 January 2013. However, in a judgment dated 22 May 2013, the Swiss Federal Supreme Court considered that this interpretation was incorrect and that the date of coming into force was 12 March 2012. Nevertheless, in order to understand the substance of the entry into force of this initiative, it is useful to refer to the contents of the Ordinance mentioned above. Nevertheless, a draft federal bill intended to replace the Ordinance was already published in a dispatch of the Federal Council on 19 February 2104. It will be deliberated in Parliament in the course of the current year or 2015. To date, three main rules can be deduced from the text of the initiative and the Ordinance. First, as of 12 March 2012, it is no longer possible to build new second homes in municipalities where the proportion of second homes is greater than 20% of the housing stock. Second, a second home is any residence that is not used throughout the year by a person domiciled in the municipality, or for the purpose of gainful employment or education. Finally, in principle, existing properties will not, except in cases of abuse of rights, be affected by this restriction. In other words, a property which is already built or for which a final building permit was obtained by 12 March 2012 may be sold as a primary or secondary residence, regardless of whether it is located in a municipality where second homes already make up more than 20% of the housing stock. By the same token, in future a principal residence may still become a second home, and vice versa. The draft bill that the Federal Council discusses in its dispatch essentially retains the three principles described above while adding a certain number of options for building second homes.

 

For foreign nationals seeking to acquire real estate, but who do not meet the aforementioned conditions as well as the requirements set forth in both Lex Koller and Lex Weber, the only solution is to take up residence in Switzerland. With regard to European nationals, obtaining a residence permit is relatively simple, so that, once resident in Switzerland, they are no longer subject to the requirements set out in Lex Koller. For wealthy individuals not wishing to pursue a gainful occupation in Switzerland, the best solution is to opt in favour of a lump-sum taxation regime. By virtue of a tax regime such as this, the taxpayer no longer pays any taxes on his assets or income, but rather only on the basis of his expenses. Until December 2015, the amount thereof may not be below five-times the rental value of the property in which the taxpayer resides, and every canton is free to set the minimum threshold of expenses. Starting on 1 January 2016, the cantons shall retain their freedom of action with regard to municipal and cantonal taxes, but the minimum threshold for the purpose of calculating federal taxes will be set at CHF 400,000. In addition to this, as of the same date, the amount of expenses in question may not be less than seven times the rental value of the property in which the taxpayer resides. With regard to non-European nationals, the procedure for obtaining a residence permit is more complex. Before obtaining a residence permit or during essentially the first ten years of their stay in Switzerland, they may only acquire their primary residence, whereby the land-plot in question may not - notwithstanding any special exception granted from this rule – exceed 3,000 m2. They may likewise benefit from an expense-based tax regime, whereby the minimum thresholds may be higher, depending on cantonal rules, than those mentioned above.

 

For practical purposes, a foreign national who wishes to maintain his place of residence in his home country must ensure that he satisfies the conditions set out in Lex Koller and Lex Weber. If this is not the case, he must consider moving to Switzerland after having examined, with a specialised attorney, the conditions to be met in order to do so.