Swiss Federal Law on the Acquisition of Property by Persons Abroad (LFAIE)
Foreigners (non-resident in Switzerland) may purchase property in Switzerland under certain conditions. Most of these conditions are defined under the Swiss Federal Law on the Acquisition of Property by Persons Abroad (LFAIE), otherwise known as “Lex Koller” (effective at 1st October 1984). The number of secondary residence acquisitions (holiday homes) that foreign nationals may purchase is restricted to 1,500 per year for the whole territory of Switzerland and is divided among the cantons with municipalities that promote tourism.
Conditions for the acquisition of a secondary residence
Switzerland distinguishes several “categories” of foreigners based on their nationality and their residence permit. If you do not benefit from a Swiss settlement permit or a valid residence entitlement (L, B or C), you shall be considered as a person from abroad under the Law and shall be subject to the LFAIE in such a way that you shall be obliged to request entitlement to purchase your secondary residence property pursuant to the following conditions:
• Purchase authorization issued by the competent authorities
• Exclusively within a touristic municipality (see list). Since 1st January 2016, the “Lex Weber” Law (see figure A) imposes a municipal quota system of 20% of secondary residences maximum (see paragraph)
• Exclusively for private usage. Rental is permitted periodically and must not be permanent (maximum 6 months per year).
• A single holiday property per family: husband & wife (concubines) and/or minor children (under 18 years old). From the age of 18, an owner’s child may purchase a property in their own name provided they can prove their financial independence.
• 200 m2 max. living surface (up to 250 m2 in certain situations)
• 1,000 m2 max. land surface (up to 1,500 m2 in certain situations) if the purchase is a chalet or an individual house
• The property cannot be resold during 5 years, except in the event of force majeure (illness, death, etc.), but without profit. The period begins from the date of transfer of ownership. In certains cases, and after the 5 years, if the property is not occupied for a long period of time, it must be sold within a period of 2 years
Acquisition of commercial property
A person resident abroad may purchase commercial property in Switzerland without any restriction. This property may be used for an activity or rented. There are no restrictions as to the geographical location or to the number of properties purchased. Likewise, the purchaser may purchase in their own name or through a Swiss or foreign legal structure.
a. The Lex Weber Law
The Lex Weber Law is an initiative approved by the Swiss population on 11 March 2012, establishing a limit of 20% of secondary residences for each municipality.
Since 11 March 2012, in Swiss municipalities where the secondary residence rate is higher than 20%, no new dwellings may be created for the purpose of secondary residence. Potential Swiss purchasers, foreigners holding a B or C permit and foreigners wishing to purchase a secondary residence holiday property (LFAIE) are equally affected by this restriction.
b. Purchase fees
Notary fees and purchase fees in Valais Canton Valais canton: 3% of the selling price
c. Duties and taxes
In Switzerland, taxes are levied by 3 authorities, i.e. the Confederation, the canton and the municipality.
For natural persons, only real estate assets – located in certain cantons (for example, the Vaud canton) – and related income (rental value) are taxable. All other income and wealth are taxable at the taxpayer’s place of residence. Notwithstanding, the aforementioned should be brought to the attention of tax authorities to be used to determine the overall rates of the different taxes, unless the owner agrees to be taxed at a flat rate, which may occasionally be to their advantage.
The taxable value of property is used as the base for determining the taxable wealth income (80% of the market value).
The rental value is equivalent to the amount that the owner should pay for renting an identical property. It is used as the base for income tax.
In addition to these direct taxes, the following taxes are levied:
– A direct federal tax
– An annual property tax
– A visitor’s tax