Real Estate Practices in Switzerland
Real Estate Practices Overview in Switzerland
Fees and cost vary in each of the different 24 Swiss cantons, while the general practice of buying is similar all over the country:
Sales cost (notary, stamp duty, sales tax, (registration?) inscription fee) will be a total of 1-3% of purchase price. In some cantons it will be split between buyer and seller, in other cantons the buyer pays all of it.
Sales commissions of between min. 2% and 5% are included in sales prices and will therefore be paid to the agent by the vendor. The agent should not ask for a buyer's fee unless special circumstances (explicit mandate to search for specified property is contractually agreed on).
There is no multiple listing service in Switzerland although some agents share properties between themselves through individual agreements or networks.
There is a requirement for agents to be licensed in Switzerland although the reputable firms will only employ those with a proven track record. There is not a very strict Government legislation regulating the industry.
Mortgages are widely available to foreign buyers. Most Swiss banks will finance between 50% and 70% of purchase value, subject to status. Interest rates normally are amongst the world’s lowest.
Residential sales to foreigners are subject to approval: Holiday residences (where position, size and yearly overall number of properties is restricted) will need a "buying permit", where a "permit of residence" is a necessary condition for first residence. Cost of such permit might be a few thousand Swiss Francs.
Sales contract may be signed any time at a notary's, who will then apply for the necessary permit. Notary will register the purchase only after receiving the necessary permit. The issue of a Permit to Purchase will take approx. 3 months, whilst issue of a Primary Residency Permit might take a few weeks only.
Under circumstances, first residence might be combined with a flat-tax agreement.
Buying Property in Switzerland
Legal aspects of Canton TICINO
Summary - Foreigners who are not Swiss residents are permitted to buy a holiday home in so-called "tourist areas." The property size is restricted to approx. 200m². of net living area, there are also restrictions for the maximum surface-area of land (approx. 1000m².). On top of it, there is a limited yearly number of permits. The owners need to occupy their property at least 3 weeks per year. Foreigners with a residency permit (previously known as permit B for foreigners living in Switzerland as "main residence"), are free to buy property.
Details as of 2012
Property and residence - In regards to property, Swiss law differentiates between "Non-residents”, “residents with restrictions (“B-permit”)” and “citizens and/or permanent residents (C-permit)”. The first two groups are subject to restrictions - to prevent foreign speculation with Switzerland’s limited land:
Buying holiday property as a tourist: You can buy one property of up to 200m² of net living area and 1000m² of land, in areas which are defined as “tourist areas”. A house or flat with a gross area of 250m² will usually be equivalent to 200m² net. The size of such property is relatively small, but by sharing a larger property between family members, there may be an opportunity to buy a larger property - your real estate agent will inform if how such opportunity might arise. You are not permitted to re-sell your holiday property for 5 years (unless in severe circumstances), nor to sub-let your property for commercial purpose all-year round, and you are required to live in it for a minimum of 3 weeks per year and a maximum of 3 consecutive months twice a year.
Buying property for residential purpose (“main residence”):
EC-Citizens - As an EC-citizen you have a contractual right to become a resident in Switzerland, when declaring to install in Switzerland your “Center of your private life", “not be absent more than 6 consecutive months" per year, to pay your main taxes in Switzerland, and provide reasonable evidence that you will not require social welfare in the foreseeable future. Upon application for such residency-permit (the often called type B), you can buy property (where the maximum permitted land size of 3,000m² is not strictly enforced) as Swiss do. Once you have received the permit the acquisition will be settled. Afterwards you’re free to buy additional property as you like.
IF you are over 55 years of age, declare you are not working in Switzerland and living off savings or foreign income, you will receive the residency-permit without difficulty and you may have the opportunity to take advantage of a very beneficial Swiss tax-benefit known as “lump-sum-taxation”, as mentioned below in this document.
IF you are under 55 years of age, declare you are not working in Switzerland and living off savings or foreign income, you will be required to provide proof of your investments to confirm that you will not require the aid of social benefits. Generally, a possible “lump-sum-taxation” is higher the younger you are.
IF you wish to live and work in Switzerland, you will have to apply for a work-permit first, which will be granted to you depending on your occupation:
- If you are an employee, the employer will have to apply for you.
- If you own or found your own business, you will have to apply yourself, giving information about a reasonable business-plan (which will be followed and checked in the coming years). In both scenarios you are likely to receive a work-permit. You will then receive a residency-permit, which allows you to buy property (as mentioned above).
- If you own or found a company in Switzerland with more than 50% of the capital being Swiss, you can buy unlimited properties through your company.
Non-EC- Citizens - The procedure is similar, but Non-EC citizens have no contractual right to receive a permit when asking for residency. Authorities will decide on a case-by-case basis, if there is sufficient reason for Switzerland to grant residence (law says “if it is in the interest of the state or not”).Reason might include showing evidence of a strong nexus between the applicant and Switzerland, or a commercial interest between the two. A commercial interest could arise from setting up a business in Switzerland, or from becoming subject or agreeing on a high taxable income in Switzerland. Such income could be a regular income or a lump-summarized income with subject to lump-sum-taxation. Here lump-sum taxation will again be higher than in the cases mentioned above. There are a maximum number of such permits issued by the government each year.
Buying a “secondary residence for professional reason”:
If you visit Switzerland regularly - for professional reasons - you are permitted to buy a "secondary residence" without restriction and without taking legal main-residence. You have to demonstrate that there is a professional reason for you to be here on a regular basis (being head of a company with a Swiss branch, for ex..) and that you are in need of a suitable residence (the larger the residence, the more proof you will have to provide why you’re in need of such a large residence). The law does not specify how many times per year you have to be here, it says "on a regular basis."
Buying commercial property (office-buildings, superstores, factories etc.):
Can be acquired without restriction for commercial purposes, but for residential purposes the special procedures mentioned above will apply. This rule excludes apartment-complexes which are considered for residential and not for commercial purposes.
NOTE: Working residents have the right to bring their families with them.
There are other minor conditions, which we will explain in further detail, should you be interested in buying a property in Switzerland.
All the given m² figures are approximate and to a certain extent subject to negotiations between the buyer and the authorities.
Residency and Citizenship - If you are applying for residency, the first permit you will be granted is Permit B, with restrictions as mentioned above. After 5 years of holding a Permit B you can apply for a Permit C (legally close to Swiss citizenship in most aspects, but without voting power). Once you have a Permit C you will be permitted to apply for Swiss citizenship, which will have to be granted by your local council.
Taxes - All Swiss residents and citizens are of course subject to yearly taxes. Taxes are calculated both on income (approx. 10%-38% from “net income after deductions”, the net income is calculated in a complicated procedure) and on wealth (approx. ½% of net wealth). These taxes are subdivided in council, cantonal and federal tax. Each council has its own applicable tax multiplier (from 50% to 140% of calculated taxes) to define the council’s tax, so taxes vary from village to village. All Property is subject to taxes, both income (a theoretical or effective income through a property) and wealth (the official, i.e. registered value). For a specific property we can calculate exactly what the taxes will be, which are approximately: Calculate between 1/1000 and 4/1000 of purchase price for yearly wealth-tax, and additional 1/1000 to 10/1000 for yearly income-tax (example: a property with a purchase price of $1 million would have yearly tax costs of min. $2000 up to max. $14'000). In Switzerland there is a very attractive tax scheme for foreigners called lump-sum-taxation. Under circumstances, a foreigner taking residence in Switzerland without a working permit (B or C), and declaring not to work in Switzerland, can apply for a yearly lump-sum-taxation, which will be deducted and calculated from his lifestyle in Switzerland, neither considering his worldwide wealth nor his worldwide yearly income (but of course considering his declared wealth in Switzerland and the possible income hereof). The lump-sum will be fixed and not changed in the future, unless the person undertakes a considerable change in his lifestyle which is mainly defined by the property (size/cost). Minimum taxable lump-sum starts at CHF 400’000.- p.a. at the moment: Lump-sum payable yearly tax (samples, exact numbers need be evaluated), 400’000 130’000 (32,5%), 500’000 170’000 (34%), 800’000 290’000 (36%), 1’000’000 365’000 (36,5%), 1’500’000 570’000 (38%). Note: The tax-multiplicator is identical to the multiplicator for normally taxed income.
Notary and purchasing fees and taxes - These fees have to be paid by the buyer and add up (all fees, taxes, notaries, etc. combined) to 2% of the purchase price, to be paid with/at purchase.
Permits and/or Residencies application (cost) - The residence permits normally costs between CHF 1000.- and CHF 4000.-.
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