Foreigners purchasing real estate and residential property in Switzerland
Contents
■ ■ ■ ■ ■ ■ ■ ■
What is the Lex Koller? A brief introduction. What kind of purchasers does the Lex Koller cover? What uses of real estate require authorisation? What can foreigners purchase easily? Summary tables Is there a Lex Koller for legal entities? Glossary Engel & Völkers in Switzerland and the Principality of Liechtenstein
The main points in brief ■
Switzerland imposes restrictions on foreigners buying real estate. Purchasing real estate for business purposes does not require special authorisation. ■ Foreigners may only purchase their primary residence in Switzerland if they are actually going to come and live in the country. EU and EFTA citizens can have any type of residence permit (a B, C, potentially also L permit), whereas citizens of other countries must have a permanent residence permit (C permit). ■ Holiday homes can be purchased without special authorisation up to a certain quota, which varies from canton to canton. ■ Although shares in listed property companies and investment funds can be freely traded, buying shares in unlisted property companies is subject to restrictions. ■
1 What is the Lex Koller? A brief introduction.
Fearing a ‘clearance sale’ in the country, Switzerland first introduced legislation restricting the purchase of real estate by foreigners in 1961. The rules have been relaxed on several occasions, most recently in 1997, and are now known under the name ‘Lex Koller’ (‘Koller's Law’). The law was enacted by the federal government, bringing it into force across Switzerland. The cantons are responsible for ensuring it is enforced. The law, which is based on a negative definition, governs the types of real estate transaction for which foreigners must seek special authorisation. All transactions that meet all of the following criteria require this authorisation: ■
The purchaser is a foreign non-resident; The real estate incurs an authorisation obligation by virtue of how it is to be used; ■ The right acquired in the purchase is deemed to represent the acquisition of property within the meaning of the ANRA. ■
All other types of transaction do not require special authorisation and are thus easy to carry out.
2 What kind of purchasers does the Lex Koller cover?
The term ‘foreign non-resident’ covers the following groups: ■ ■
Foreigners resident abroad; Foreigners who are resident in Switzerland but who are not citizens of an EU or EFTA country and lack a valid permanent residence permit.
In other words, the following may purchase real estate in Switzerland easily: ■
Swiss citizens, including those with dual nationality, who are resident in Switzerland or abroad; ■ EU/EFTA citizens legally or actually resident in Switzerland (with a B or C residence permit, potentially also an L short stay permit); ■ Citizens of other countries who hold a C permit and are actually resident in Switzerland. Real estate may only be purchased via a legal entity if the company has its registered office in Switzerland and is controlled by individuals resident in Switzerland. This means that foreigners cannot use a Swiss joint stock company (‘Aktiengesellschaft’) to circumvent the rules. The status of the private individual who is the beneficial owner of the company determines whether or not authorisation is required.
3 What uses of real estate require authorisation?
As a basic principle, single-family dwellings, apartment buildings, owner-occupied flats and building land destined to contain buildings of this kind all require authorisation and can therefore not be purchased by foreign non-residents. Undeveloped land will trigger an authorisation obligation if construction of a building that does not require authorisation does not begin within one year. Exemptions apply to the second homes of cross-border commuters that are located near their place of work as well as to flats that share premises with a business. In other words, foreigners may freely purchase any building as long as it is for commercial use. Authorisation is required for the purchase of real estate and for all transactions that grant the foreigner a power of disposal that is deemed equivalent to ownership. In particular, these include: ■
The acquisition of real estate, a leasehold, occupancy rights or usufruct rights; Acquiring shares in a legal entity unless these are listed on a Swiss stock exchange; ■ Granting and exercising purchase, sale and repurchase rights; ■ Other transactions that grant the acquirer a status deemed equivalent to ownership (e.g. a long-term lease agreement with non-standard contractual terms). ■
4 What can foreigners purchase easily?
There are a number of key exemptions and opportunities for foreigners resident abroad to purchase property or building land in Switzerland despite the Lex Koller. Exemption 1: commercial property and business premises If the real estate serves as the permanent premises of a retail, manufacturing or other commercial business, a workshop or the practitioner of a liberal profession, then it may be purchased without special authorisation. This also includes restaurants and doctors’ surgeries. A purchase would only encounter problems if the property were used for residential as well as commercial purposes. Flats on commercial premises can only be purchased without special authorisation in justified exceptional cases, e.g. if they can be declared essential to the business or could not be separated physically from the commercial side. Business premises containing an officially prescribed quota of residential property do not require any additional authorisation. Exemption 2: holiday homes in some cantons A number of cantons permit holiday homes to be purchased without special authorisation (i.e. exempt from the Lex Koller). These are Appenzell Ausserrhoden, Bern, Fribourg, Glarus, Grisons, Jura, Lucerne, Neuchâtel, Nidwalden, Obwalden, St. Gallen, Schaffhausen, Schwyz, Ticino, Uri, Vaud and Valais. The homes in question must have a plot area of less than 1,000 square metres and net floor space of less than 200 square metres. Net floor space includes all habitable and heatable rooms including saunas, swimming pools and games rooms but excluding balconies, stairwells, cellars and attics.
5
A quota system applies throughout Switzerland to foreigners purchasing holiday homes. Only 1,500 holiday homes may be sold each year to foreigners not resident in Switzerland, with significant differences in availability between the various cantons. For instance, Valais's quota is 330 per year, whilst that for Appenzell Ausserrhoden, Uri, Nidwalden, Obwalden, Glarus, Jura and Schaffhausen is only 20 in each case. When buying a holiday home, therefore, foreigners have to ‘acquire’ one of these quota places or hold off with their purchase. Exemption 3: foreigners whose residence and tax domicile are both in Switzerland Foreigners resident in Switzerland do not need special authorisation to purchase a residence in the place they actually live. They must live in this residence themselves and may not rent it out, even in part. EU/EFTA citizens who are actually and legally resident in Switzerland and who hold a residence permit (B permit) as well as other foreign nationals with a valid permanent residence permit (C permit) are classed as Swiss residents under the Lex Koller. They thus have the same entitlement as Swiss citizens to acquire real estate and can purchase all forms of property (i.e. including apartment buildings or second homes) without special authorisation. Exemption 4: Swiss property companies and investment funds If a property company is listed on a Swiss stock exchange and regulated by the Swiss Financial Market Supervisory Authority FINMA, the Lex Koller will not apply to shares purchased in this company. If a residential property company is not listed on a Swiss stock exchange and was set up to acquire or hold residential real estate or other non-commercial real estate, the situation will depend on the foreign buyer's place of residence, type of residence permit and country of origin. If the property company in question deals in both residential and commercial space, authorisation will be required once residential property makes up at least one-third of the company's portfolio.
6 Summary tables Foreigners purchasing real estate Foreigners resident in Switzerland SFD/OOF as primary residence
SFD/OOF as secondary residence
SFD/OOF as holiday home with quota allocation
AB
Commercial business premises
EU & EFTA citizens with B or C permit
P
P
P
P
P
Non-EU & nonEFTA citizens with C permit
P
P
P
P
P
Non-EU & nonEFTA citizens with B permit
P
O
P
O
P
Non-EU & nonEFTA citizens with no permit
O
O
P
O
P
Example: If you are an EU or EFTA citizen and you hold a B or C permit in Switzerland, you can purchase any type of property without special authorisation. SFD = single-family dwelling; OOF = owner-occupied flats; AB = apartment building
Foreigners resident abroad SFD/OOF as primary residence
SFD/OOF as secondary residence
SFD/OOF as holiday home with quota allocation
AB
Commercial business premises
EU & EFTA citizens
O
O
P
O
P
Non-EU & nonEFTA citizens
O
O
P
O
P
Example: If you are an EU or EFTA citizen resident outside Switzerland, you can purchase a holiday home or business premises without special authorisation.
7 Is there a Lex Koller for legal entities?
Legal entities are also covered by the Lex Koller and thus require authorisation to acquire real estate. A company with legal personality is deemed to be a foreign entity if it is domiciled abroad, if it acquires real estate via trustees or if foreigners hold a controlling interest in it. A controlling interest in a company or legal entity is deemed to exist if its owners based abroad hold more than one-third of company capital between them, hold more than one-third of voting rights between them either directly or indirectly, or furnish outside capital upwards of a certain threshold. In this case too, foreign entities must request authorisation from the competent cantonal and federal authorities before they are permitted to purchase real estate in Switzerland. The exemptions detailed above also apply here, specifically the fact that the Lex Koller does not apply to real estate used as permanent business premises, as a workshop or for manufacturing. By contrast, real estate cannot be acquired for the purposes of building or letting residential property in Switzerland.
8 Glossary ■ ANRA: Swiss Federal Act on the Acquisition of Immovable Property in Switzerland by Foreign Non-
Residents ■ Primary residence: municipality in which a person resides with the intention of remaining permanently and
making it the centre of their vital interests, a situation that must be recognisable to third parties. A person can only have one primary residence. ■ Secondary residence: municipality in which a person resides for at least three consecutive months or three
months within the same year for a particular purpose without, however, intending to remain permanently. A person can have several secondary residences. ■ Holiday home: if a holiday home is used for the purposes of tourism, it is no longer to be covered by the
Swiss Second Homes Act (Zweitwohnungsgesetz), as stipulated in the federal government's ordinance implementing this Act and elsewhere. ■ Categories of residency in Switzerland and types of permit: anyone who works during their stay in
Switzerland or who remains in the country for more than three months requires a permit, which is issued by the cantonal migration offices. A distinction is made between short stay permits (less than one year), residence permits (temporary) and permanent residence permits (permanent). ■ B permit: this permit is held by citizens of another EFTA or an EU country who have taken up longer-term
residence in Switzerland for a particular purpose. They may or may not be in gainful employment. The permit remains valid for five years. ■ C permit: This permit is held by foreigners who have been granted permanent residency after having lived in Switzerland for five or ten years. This right is without time restriction and no conditions can be imposed on it. The Swiss Federal Office for Migration (FOM) specifies the earliest date from which the competent cantonal authorities can grant permanent residency to the various categories of EU/EFTA citizens living there. The Lex Koller is a complex piece of legislation. This companion to the Lex Koller is designed to answer your most important questions but is no substitute for a specific assessment of your own individual situation. We would be happy to provide you with personalised advice. Please do not hesitate to contact your Engel & Völkers property consultant. Sources ■ Admin.ch: ANRA ■ GHR Rechtsanwälte law firm: ‘Lex Koller’ ■ Lucerne University of Applied Sciences and Arts, Lucerne School of Business, Institute of Financial Services
Zug (IFZ): ‘Lex Koller’ ■ Hallo-schweiz.ch ■ ch.ch/de/immobilien-kaufen-als-auslaender
All information correct as of April 2015. Errors and omissions excepted.
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