Property Buyers Guide to Switzerland

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Overview

The Switzerland Property Market

In considering an overview of property for sale in Switzerland, the most striking fact associated with real property in Switzerland is the fact that overall the costs associated with real estate in Switzerland is higher than any other country in Europe. In addition, the cost of living in Switzerland is generally higher than any other country in Europe at the present time.

Historically, Germans have been the primary group of foreign nationals that have taken to purchasing real estate in Switzerland.

Purchase Conditions

The sale of real estate to a non-Swiss citizen is subject to several laws. The actual law is named Lex Friedrich. Each canton has an annual quota of properties authorized for sale to non-Swiss.

An authorization must be obtained from the Cantonal Authorities and from the Federal Department of Justice and Police, through a notary (who are public officers in Switzerland ).

Purchase Procedure

Once the client has chosen a chalet or apartment, the procedure is as follows:

  • Complete a civil status questionnaire
  • Complete a declaration of honour
  • Complete a Power of Attorney which states the following: Name and address of the purchaser Location and
    name of the property Number of the parking space (if applicable) Detailed selling price Schedule of payments,
    as a percentage of the total sale price
  • Produce a copy of his/her passport, signed.

The signature on the Power of Attorney and on the copy of the passports must be legalized. (i.e. witnessed by a notary) The above documents are normally completed with our help and then forwarded to the official Swiss notary who begins the purchase procedure. Once the notary has received all the completed and signed documents, plus the deposit, he will take the following steps:

  • Proceed to the signing of the deed sale
  • Apply for the authorization to purchase on behalf of those who are not resident in Switzerland.The administrative
    time taken to obtain the authorizations is usually two or three months from the date of submission of the
    application. It may be slightly longer depending on the area where the property has been purchased.

Once the authorization has been received, the notary will duly record the deed of sale in the Land Register

Purchase Security

An official Swiss notary will act on behalf of both the purchaser and the vendor. He draws up the deeds and documents required for legal ownership. He is there to protect the interests of both parties. It is a notary of the district who will act on behalf of the vendor and the purchaser.

Legal Restrictions

  • Non-Swiss may only buy one property of maximum 200 square metres of liveable space per family: a
    family is defined as husband and wife and / or under-age children. Over the age of 20, the son or daughter
    of an owner may purchase one property in his/her own name,
    provided he/she can prove his/her financial independence.
  • It is now possible to resell an apartment after its acquisition to another non-resident, subject to the
    restrictions under the Lex Friedrich. All applications must be made through a notary's office, once a buyer
    is found.
  • Under Swiss Law, an owner or his family may occupy their apartment for up to six months per year (Maximu
    m stay is three months per visit).
  • The accommodation cannot be rented on an annual basis (maximum 11 months and 1 week).
  • No authorization is required for the purchase of a principal residence if the buyer has a residence permit B
    (i.e. work permit for non nationals), except if the land exceeds 2,000 square meters.

EU citizens with a residence permit B and all foreigners with a residence permit C (i.e. residence permit for a non-Swiss national) can buy as many properties as they want. They are considered as Swiss citizens

Mortgage Options

When considering the options for a mortgage on your overseas property there are a couple of choices to consider.

For more details on Mortgages in Switzerland visit our Mortgage page in the Switzerland section.

Legal Aspects

The Propriete Par Etage (PPE) means co-ownership by floor. The co-ownership is a legal right that consists of two inextricably linked elements:

  • a share of the whole building and its integral parts (totality of the property / walls / balconies / fences / concrete
    and floor / roof covering and plumbing / common parts, etc.).
  • an exclusive right to use your defined parts of the building (your apartment and garage if applicable)

The building is divided into shares and measured in thousandths.

The administrative control of the PPE co-property is exercised by the co-owners' annual general meeting.

Property Abroad always recommends using a Solicitor or Lawyer

Further Information on Switzerland

Annual Expenses

1. Co-ownership charges (about 0.8% to 1% of purchase price p.a.)

It is commonly estimated that the annual running costs of a building are about 0.8% to1% of the purchase price. These costs are divided up proportionally between the owners, according to the size of the apartment.

These expenses include:

  • Caretaker / social security contributions
  • Maintenance of building and materials
  • Water / gas / electricity and heating
  • Insurance and various taxes
  • Gardening and maintenance of roads
  • Administration fees and various expenses
  • An allocation to the building's renovation fund

The manager (of the co-property) collects the relevant amounts covering the total expenses incurred by the building. These are payable quarterly or half-yearly.

2. Taxes amount to about 1.3% of purchase price p.a.

Taxes are paid to three bodies:

  • The Swiss Government
  • The Canton
  • The Commune

For individuals the only taxable property and income is from that located in the Canton Valais. All other properties and income is taxable at the place of residence of the owner. However, all such holdings must be declared to the relevant tax authorities. However, if you decide to take a mortgage you can offset the mortgage interest against the rental income thereby minimizing the tax payable.

Cost and Legal Formalities

The purchase of a chalet becomes valid once the owner is registered at the Land Register. The purchase fees amount to a total of 2.5% (Notary and registration fee)

By Power of Attorney, the future owner entrusts the appointed notary's office with the duty of ensuring that all the legal formalities are respected, particularly the registration of the deed in the Land Register and releasing the acquired apartment from any previous mortgage.

At the preliminary payments (i.e. deposit) must be made to the notary, deposit into his client account.

Construction guarantee (for new buildings only):

The federal construction guarantee is:

  • Five years for construction defects
  • Ten years for hidden defects.

For resale properties, there is no guarantee

Death duties

In the event of death there is no inheritance tax for the specific case of direct descendants in the Valais region of Switzerland , which means the property goes to the next of kin.

Financial and Legal Consideration

Taxes and profit from real estate (Capital Gains tax)

In the case of resale, the property is subject to an appreciation tax. As the purchase price is not indexed to the cost of living in Switzerland , the taxable profit is the difference between the sale price and the purchase price.

The purchase price means:

  • The actual purchase price
  • Purchase fees
  • Possible added value (e.g. renovations
  • Any commission due to real estate agents
  • Other costs

The rate of Capital Gains tax decreases according to the years of ownership.

Returns

To date the principal source of profit for foreign investors has been the currency hedge of the Swiss Franc.

It has allowed the initial capital:

  • to be protected from depreciation
  • to increase in value (profit speculation)
  • to protect itself against inflation
  • to be self-managing by net-returns.

Finally, the most important and less quantifiable return is the pleasure you will have from using your property and the enjoyment gained from the security and tranquillity of Switzerland.

Financing

The standard loan granted by Swiss banks for purchases is about 66% of the sales price (incl. parking space). This loan is usually granted in the form of a debit to a current account and only the apartment qualifies as security.

Traditional financing through a mortgage can also be arranged. The interest in this case is lower but the account is not as flexible in its use as the current debit account.

The rate of interest is fixed in stages and can vary depending on the state of the Swiss economy. A larger mortgage can be arranged on the basis of additional security/guarantees (shares, gold, etc.). Further information on mortgages can be obtained from AM Services SA


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