Guide to buying property in Switzerland Switzerland

All of the various reasons for the The procedure to acquire, hold and Contents The Purchase purchase of real estate have very sell real estate and its taxation are different consequences, not only primarily regulated by cantonal and of Real Estate from a tax and legal point of view, but communal laws. The purchase of real estate also regarding succession, financial The following information, prepared for in Switzerland structuring and asset allocation. In 2 in Switzerland us by Transforma Consulting is a general addition, the costs for the acquisition, introduction to this complicated legal Restrictions for the acquisition the holding and the sale are different system. In practice, each individual of real estate in Switzerland 4 depending on each specific case. Clients consider buying real estate in Switzerland for transaction must be analysed according Tax implications of taking up residency numerous reasons: lifestyle, quality of life, holiday The political, legal and economic stability to local laws and regulations and expert and inheritance tax 5 of Switzerland as well as the stable Swiss advice must be sought. purposes, a permanent home, education, relocation for Purchase of holiday home Franc (CHF), are the main reasons for a business reasons, investment and security. strong and long term investment in Swiss by non-residents 6 property. This is supported by the very Purchase of commercial property 7 This document has been compiled as a guide for high quality of life that Switzerland has potential purchasers of property in Switzerland. It does to offer with low crime rates, outstanding Financing and structuring construction, superior education and of purchase of real estate not seek to provide or replace legal advice which you 8 excellent medical facilities. Procedure for the purchase should obtain, nor is it intended to have any of real estate in Switzerland 9 contractual effect. Buying property in Switzerland 10 Contact 12

2 Guide to buying property in Switzerland Guide to buying property in Switzerland 3 Switzerland Switzerland

3. Tax implications of taking up residency and Inheritance tax

3.1 Difference between EU and non-EU citizenship for the residence permit As mentioned in part 2 of this guide, there are no restrictions for the purchase of residential real estate in Switzerland by EU citizens (permits B or C). Non-EU citizens need to wait for a permanent residence status (permit C) to purchase residential real estate other than their principal residence.

3.2 Purchase and sale of real estate as a resident person With the exception of Zürich and Schwyz, all cantons levy a transfer tax on the purchase price or the tax value of the property. In most cantons the purchaser is liable for the transfer tax, whereas The lowest maximum income tax rates (Pauschalbesteuerung, forfait fiscal, in some cantons 50% tax is paid by are at approximately 20%, the highest tassazione globale) has been confirmed both parties or by one party according at around 42%. In addition to the by initiatives on a federal level in 2014. to the purchase contract. The transfer worldwide income, a deemed rental value The new minimal taxable income is CHF tax rate is calculated differently in each of the Swiss real estate will be taxed 400’000 for the federal taxes. canton and varies in general between as income in Switzerland. On the other approximately 0.5% and 3%. hand, maintenance costs and mortgage 3.5 Succession for Swiss interests are fully deductible from the residents In addition, most cantons levy a land taxable income. As long as the Swiss residence is register fee of a few tenths of a per cent, considered a principal residence by reaching 1% in exceptional cases. In Worldwide movable assets and real Swiss international tax and private law some cantons, the notary charges for his estate in Switzerland are subject to rules, succession will be subject to Swiss services according to the time spent, and cantonal and communal wealth taxes. rules and taxes. Under Swiss inheritance in others, fees are based on a percentage Wealth tax is levied on net assets, law, forced heirship rules are applicable of a few tenths of a per cent of the consequently mortgages and other in relation to relatives. Swiss international purchase price. loans are deducted from the tax private law allows foreigners to ‘opt-out’ value of assets. Net assets are taxed Traditionally, all real estate agency fees if the last will and testaments falls under 2. Restrictions for the acquisition at progressive rates which reach a are paid by the seller unless agreed in another governing law. maximum between approximately of real estate in Switzerland advance or if a buyer signs a search 0.1%-1% depending on the cantonal Gift and inheritance taxes are currently mandate to provide a bespoke and communal tax rates. only levied on a cantonal and communal According to the federal law regarding search service. Prohibited Residential real estate purchase outside the designated level. In most cantons there is no taxation the acquisition of real estate by persons Lump sum holiday zones, by non-Swiss citizen without residence Tax implications of taking 3.4 between spouses as well as direct abroad (also referred to as ‘Lex Koller’), 3.3 up residency For non-Swiss citizens without any descendants. While some cantonal the purchase of residential real estate Quota system Holiday home purchase by person without residence permit gainful activity in Switzerland, a large tax laws do not levy any gift and/or is restricted in Switzerland for foreign In general, one of the consequences of a number of cantons provide for a taxation inheritance tax, others impose gift and citizens. Based on the bilateral permit B is that the person is considered No restrictions Residential real estate purchase by EU/EFTA citizen according to the rental value (typically inheritance taxes up to approximately agreements between the EU and to be a tax resident in Switzerland with residence permit (permits B and C) multiplying the annual rental value by 40% for non-related persons. Switzerland, Swiss law facilitates the according to Swiss laws. 7) of the Swiss property as well as the purchase of residential real estate for EU One property as Residential real estate purchase by non-EU citizen According to Swiss tax law, worldwide living costs and does not consider a citizens. In a nutshell, real estate can be principal residence with residence (permit B) income and worldwide wealth are taxable client’s worldwide income. Furthermore, purchased under the following conditions: in Switzerland and have to be declared. tax authorities require a minimum tax No restrictions Residential real estate purchase by non-EU-citizen As taxes are levied on a federal, cantonal burden of at least CHF 120,000 to with permanent residence permit (permit C) and communal level, the tax rates vary in grant lump sum taxation in the case each commune and are progressive. of real estate with a relatively low tax No restrictions Commercial real estate value. This so called lump sum taxation

4 Guide to buying property in Switzerland Guide to buying property in Switzerland 5 Switzerland Switzerland

4. Purchase of SH holiday home by Major Touristic Areas BS in Switzerland non-residents TG French Part ZH ww Chateaux-d’Oex 4.1 Conditions AG BL ww Crans Montana According to Lex Koller, the purchase of JU AR ww Les Diablerets a holiday home is subject to the following SO ZURICH AI ww Montreux/Vevey conditions: ww Neuchâtel ww ww Authorisation of the purchase by SG ww the relevant authorities Villars ZG ww ww Only within a tourist commune (Village) LU Weggis SZ BERN German Part ww Within the annual permit quota for each NE GL ww Adelboden canton/commune (Village) NW ww Klosters Andermatten ww BE ww Arosa Personal use only. The owner may OW Flims/Laax Engelberg Davos ww Davos only rent the property periodically, Arosa Scuol ww not permanently Meiringen UR Lenzerheide Engelberg VD ww Flims/Laax ww GR Maximum of 200 sq m of official living FR Grindelwald Zuoz ww Grindelwald area (up to 250 sq m can sometimes Andermatten ww Samedan Gstaad be approved) Chateau ww Klosters Gstaad Adelboden St Moritz Pontresina D'Oex ww ww Maximum of 1,000 sq m of land Lenk Lake Geneva Lenk ww Lenzerheide (up to 1,500 sq m can sometimes Montreux Leukerbad ww be approved) Swiss Les Diablerets Leukerbad Riveria ww Meiringen Villars TI In the whole of Switzerland, only 1,500 Crans Montana ww Pontresina holiday home purchase authorisations ww Samedan Veysonnaz/ Locarno/Ascona are granted to non-residents each year. GE VS ww Scuol The Swiss government allocates the ww St. Moritz GENEVA Verbier regional quotas according to the number Lake LUGANO ww Weggis Zermatt Maggiore of tourism facilities and new ww Wengen developments as well as the proportion Lake ww Morcote Lugano Zermatt of land. The cantons , Grisons, ww Zuoz Berne, Ticino and Vaud receive an Italian Part* allocation between 140 and 330 Switzerland the owner becomes ww Ascona authorisations each, the other cantons personally liable for income and wealth ww Locarno receive less than 100. taxes in connection with the property. ww Lugano Usually, holiday homes are taxed based If the purchaser/vendor acquired the ww Morcote property as a ‘person abroad’ under the on the deemed rental value and tax value at the rates applicable to worldwide *Non-resident purchase available quota system, no new authorisation will throughout this region. Please contact income and wealth. For the sake of on the holding period, varying from estate in Switzerland is subject to the permanent residents. This will potentially be necessary and the purchase does not for any specific location. fall under the current quota. simplicity, the tax authorities may agree approximately 10%-50%. cantonal inheritance tax (subject to each increase the value of holiday residences to apply maximum tax rates without individual’s circumstances, please due to a future shortage of availability 4.2 Tax implications of declaration of worldwide income and 4.5 Succession of a holiday home seek advice). within the next 5 years. the purchase wealth. The tax rates are the same as As authorisation to acquire real estate 4.6 Restrictions for building The tax consequences for the purchase those for Swiss tax residents (see point as a non-resident person is granted new holiday homes since 5. Purchase of and sale of a residential property are 3.3). Some cantons also impose a lump to the property and not the person, 1st January 2013 commercial explained in point 3.2. sum tax for holiday homes. In general, no new authorisation according to mortgage interest and maintenance costs Lex Koller should be necessary for In March 2012, a referendum (so called property 4.3 Tax implications of the holding are not deductible. donation or inheritance, as long as Franz Weber initiative) was accepted of a holiday home the recipient is not already an owner by the Swiss population to limit the The purchase of commercial real 4.4 Tax implications of the sale estate is not subject to restrictions for In Switzerland each property’s of a holiday home in Switzerland. building of new holiday homes in tourist In some cantons a sale is only allowed regions to a maximum of 20% of the foreigners, therefore no residence permit value is estimated on a regular The inheritance from a deceased after a minimum holding period constructible area of a commune. or purchase authorisation is required. The basis by the communal or cantonal person who was resident abroad (typically 5 years). The capital gain is property may be used for the owner’s authorities to determine a deemed does not generally fall under Swiss Currently more than 500 tourist taxed on a cantonal and in some cantons business or can be rented out to generate rental value for the income tax and inheritance law. However, for the communes exceed this limit. As a on a communal level as well. The tax revenue. Commercial real estate may also a tax value for the wealth tax. change of property ownership property consequence, no new building permits rates are progressive depending on be purchased solely as an investment. Swiss laws may apply. In addition, real are being authorised unless for use by As part of owning real estate in the amount of realised capital gain and

6 Guide to buying property in Switzerland Guide to buying property in Switzerland 7 Switzerland Switzerland

6. Financing and structuring 7. Procedure for the purchase of purchase of real estate of real estate in Switzerland

6.1 Assets or loan 6.2 Purchase through a structure A purchase of a holiday home by children 7.1 Steps of the purchase restriction/limit and a reservation fee is 7.3 Time frame like a Swiss Company, a foreign is authorised, provided that they are payable to the seller. Financing the acquisition by cash As a first step a buyer should analyse Depending on the necessary entity or a Trust/Foundation over 18 years old and are using their purchase is one possibility. Swiss banks whether a property can be purchased applications, the purchase may be own assets. 7.2 Necessary documents for usually grant mortgages of up to 80% Holiday homes may only be acquired as a holiday home or only as a principal the purchase procedure finalised within 2-6 months. The of the property value based on their directly by the beneficial owner. Residential real estate for a principal residence with a residence permit. ownership is only transferred with the The notary will need the following own valuation. For luxury real estate and A married couple is allowed to acquire residence is usually purchased directly (see section 4). registration of the new owner in the documents to legalise the purchase holiday homes, mortgage financing up only one holiday home in Switzerland. by the permit B or C holders. In certain land register. For the acquisition of a holiday home contract: to 60% is usually available. The interest cases, a Swiss or foreign entity can be an application for the purchase needs level in Switzerland is one of the lowest in used as legal owner of the property but ww Authorisation to purchase a holiday to be filed with the relevant authorities. Europe. the permit B or C holder has to be the home by the canton Depending if there is remaining quota main beneficial owner. Purchase through in the current year, authorisation will be ww Resident permit for main residency a trust or a foundation is possible as long granted within a few months or, if not, as the beneficial owner of the structure is ww Confirmation of a Swiss bank for possibly in the subsequent year. entitled to own real estate in Switzerland. the financing of the purchase The purchase of a property for taking Commercial or residential real estate ww Passport of the beneficial owner up residence may only be finalised after as investments are frequently acquired issuance of the residence permit. ww Authorisation in favour of the notary to using a Swiss or a foreign legal entity. withhold transaction costs and taxes The choice of the structure and its Should a holiday home authorisation from the purchase price jurisdiction depends mainly on the or a residence permit be applied for, a residence of the beneficial owner, letter of intent or a preliminary purchase the financing and the time frame agreement between the seller and the of the investment. buyer can be entered into in a first step. Usually this kind of contract has a time

8 Guide to buying property in Switzerland Guide to buying property in Switzerland 9 Switzerland Switzerland

BUYING PROPERTY IN SWITZERLAND

Below are three examples for buying, owning and selling a property in Switzerland. In each canton and in some cantons in each commune, the costs are different. Furthermore, the taxes and costs can be different for residents and non-residents. Income and wealth taxes are progressive and different in each commune and canton. The three following examples are indicative examples to understand the different systems.

BUYer OWNer vendor

PURCHASE IN GENEVA RESIDENT IN GENEVA SALE IN GENEVA

Transaction costs Annual costs Transaction costs (Based on a property valued at CHF (Based on a CHF 10m purchase) ww Notary fee: total 0.2145% 10m) ww Agency commission ww ww Transaction tax: 3% Deemed rental value of ww Capital gains tax: maximum of 50% CHF 300,000 taxed with other ww Land registration fee: 0.25% (less than 2 years holding), 0% after income at a maximum tax rate ww 25 years of holding Other costs: CHF 1,000 of approximately 40% ww Registration or overtaking of ww Tax value of CHF 10m taxed with mortgage: 1% of mortgage amount other wealth at a maximum tax rate of approximately 1%

PURCHASE IN ZUG RESIDENT IN ZUG SALE IN ZUG

Transaction costs Annual costs Transaction costs (Based on a property valued at CHF 4m) (Based on a CHF 4m purchase) ww Notary fee: maximum CHF 3,300 ww Deemed rental value of CHF 144,000 ww Notary fee: maximum of CHF 3,300 (usually 50/50 by parties) (rental of CHF 12,000/month) taxed (usually 50/50 by parties) ww Transaction fee: maximum with other income at a maximum tax ww Transaction tax: usually paid by of CHF 6,000 rate of approximately 21% the purchaser ww ww Registration or overtaking of Tax value of CHF 2.8m taxed with ww Capital gains tax: maximum of 60% mortgage: maximum of CHF 4,500 other wealth at a maximum tax rate (less than 1 year holding) and a of approximately 0.27% minimum of 10% after 25 years of holding

PURCHASE IN TICINO HOLIDAY HOME IN TICINO SALE IN TICINO

Transaction costs Annual costs Transaction costs (Based on a property valued at CHF 3m) (Based on a CHF 3m purchase) ww Notary fee: 2% (usually 50/50 ww Deemed rental value of CHF 84,000 ww Attorney fee: 2% (usually 50/50 by parties) (rental of CHF 7,000/month) taxed by parties) ww Transaction tax: 1.1% at a maximum tax rate of ww Transaction tax: paid by purchaser approximately 34% ww Registration or overtaking of ww Capital gains tax: maximum of 31% ww mortgage: maximum of 2% Tax value of CHF 2.25m taxed (up to 1 year holding), minimum of at a maximum tax rate of 5% after 20 years of holding approximately 0.6% This memorandum was prepared by Transforma AG for Knight Frank LLP in January 2014. Please note that the content of this memorandum does not constitute legal and tax advice and may not be relied upon as such. Should you seek advice for your specific case please feel free to contact the authors.

10 Guide to buying property in Switzerland Guide to buying property in Switzerland 11 KnightFrank.com E [email protected] T +442078611109 International ResidentialDepartment Head oftheSwissDesk Alex KochdeGooreynd the actsor omissionsofany otherMember. for liable is LLP) Frank Knight (including Frank Knight of name the under operating Member No Member. other any represent or bind to authority any has Member No internationally. services provide which practices or entities independent and distinct separate, of network international an and UK the in services provide which Network: Global Frank Knight the of Members 5. names. members’ of list a at References to Knight Frank may be to, look or include, any Member of the Knight Frank may Global Network. Those Members are Knight Frank you LLP and its direct subsidiaries where 8AN, W1U London Street, Baker 55 is office registered Our the prior written approval of Knight Frank LLP. 4. General: Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. 3. Intellectual property: © Knight Frank LLP 2013. All rights reserved. Copying, modification or reproduction of this review in whole or in part is not permitted without establish any advisory or professional relationship. We do not have any relevant authorisation from the Financial Services Authority to undertake regulated activities. any respect. 2. Independent advice: You must take specific independent advice from your professional advisers in all cases. In preparing this guide, reference to we the contents. do As not a general imply overview or prepared using information from Swiss lawyers, this guide does not necessarily represent the view of Knight Frank in any way. So far as applicable laws allow, no responsibility or liability whatsoever will be accepted for any errors or for any loss or damage resulting from any use of or 1. No reliance on contents: This is only a guide to the buying process in Switzerland. It is not definitive and is not intended to give advice. It must not be relied upon in Important Notice Crans-Montana Verbier Villars Chur (forStMoritzandDavos) Horgen Neuchâtel Lausanne Nyon Lugano Zürich Geneva Swiss network offices Knight Frank

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