Acquisition of Real Estate in Switzerland by Foreigners: Legal Regulation and Restrictions
In Switzerland, the acquisition of real estate by foreigners is strictly regulated. As a general rule, foreigners are prohibited from freely acquiring residential property in Switzerland. At the same time, Swiss legislation provides for a number of significant exceptions. How, then, do the rules governing the acquisition of real estate by foreigners in Switzerland operate?
General rule
As a general rule, a foreigner who does not reside in Switzerland must obtain a permit from the competent canton in order to acquire real estate (Article 2 of the Federal Act on the Acquisition of Real Estate by Persons Abroad (Lex Koller / LFAIE)).
*Article 5 of the Federal Act on the Acquisition of Real Estate by Persons Abroad (Lex Koller / LFAIE);
Who is considered a “foreigner not residing in Switzerland”?
At first glance, the list may appear unexpected, as it includes not only individuals but also legal entities. Under Swiss law, the following are considered “foreign non-residents”:
- Citizens of European Union countries who do not actually reside in Switzerland;
- Citizens of other countries who do not hold residence permits of categories B or C;
- Companies incorporated outside Switzerland;
- Companies that are incorporated in Switzerland but are controlled by a foreign non-resident (control is deemed to exist where one third of the shares or one third of the voting rights in the company belong to foreign non-residents, or where a foreign non-resident provides loans to such company in an amount equal to at least 50% of the difference between the value of the company’s assets and its liabilities);
- Any natural or legal person who is not formally a foreign non-resident but acquires real estate in the interests of a foreign non-resident. * Article 6 of the Federal Act on the Acquisition of Real Estate by Persons Abroad (Lex Koller / LFAIE);
Thus, the scope of persons is deliberately defined so as to prevent circumvention of the rules requiring authorisation for the acquisition of real estate by foreign non-residents.
Who does not need to obtain a permit?
The law provides for the following exceptions:
*Article 7 of the Federal Act on the Acquisition of Real Estate by Persons Abroad (Lex Koller / LFAIE).
- Where the property is used for trading, commercial or industrial purposes, or for conducting an active business;
- Where the property is used as a primary residence (i.e. for EU citizens and holders of residence permits of categories B and C; however, for citizens of other states holding a category B residence permit, it is necessary to prove that the property will be used as the primary residence);
- Where the property is acquired by inheritance under Swiss law;
- Where the property is transferred to close relatives or relatives of the spouse (or registered partner);
- Where a share in real estate is transferred to a person who is already a co-owner of that property;
- Where the owner of an apartment exchanges it for another apartment within the same condominium;
- Where property is acquired as compensation in cases of nationalisation or land reallocation, and in certain other cases.
It should be noted that a distinction must be made between a residence permit and the right to acquire real estate without obtaining a permit. A Swiss residence permit is issued not by the federal government but by a canton, although it is valid throughout Switzerland. As noted above, holders of category B residence permits may acquire real estate in Switzerland without a permit only for their permanent residence. Therefore, formally, it is not prohibited to acquire a primary residence in a canton other than the one that issued the residence permit; however, in practice, certain restrictions apply.
For example, a citizen of Belarus holds a Swiss category B residence permit issued by the Canton of Vaud and intends to acquire real estate in the Canton of Zug. Since such person holds a residence permit, they may acquire real estate for personal residence in another canton without obtaining a permit. However, once they actually intend to reside in the new property, they must register with the commune of the new canton and obtain approval for the transfer of the residence permit. Otherwise, the person may lose their Swiss residence permit.
If such a person does not intend to use the property as their primary residence, they must obtain a permit for acquisition within the applicable quotas and in accordance with the requirements set out below.
What if you do not fall within an exception? Is it prohibited to acquire real estate in Switzerland?
No.
First, as noted above, no permit is required for the acquisition of commercial real estate for the purpose of conducting business.
Second, it is still possible to acquire real estate, but it is necessary to obtain a special permit from the canton. Please note that foreign nationals holding residence permits of categories B and C are also required to obtain a permit to acquire a second home or holiday home.
Cantons issue permits under special quotas, the number of which usually does not exceed 1,500 per year, but may be increased in connection with cantonal plans to develop tourism or to issue construction permits in areas requiring residential development.
There are also restrictions on the type of second homes or holiday homes that may be acquired. As a rule, the total residential floor area must not exceed 200 square metres, and the land plot must not exceed 1,000 square metres (these requirements vary depending on the canton).
In addition, a family may not acquire more than one second home or holiday home, and such property may not be sold before five years of ownership (these rules also depend on the specific canton).
Grounds for refusal to grant a permit to acquire real estate
Absolute grounds for refusal to grant a permit include:
- Where the property will be used for prohibited investment purposes under Lex Koller
- (i.e. not as a primary or secondary residence, but, for example, for rental purposes);
- Where the size of the property exceeds the established limits;
- Where it is established that the applicant is attempting to circumvent the provisions of Lex Koller;
- Where the applicant, their spouse or registered partner, and their children under the age of 18 already own a second home in
- Switzerland in addition to their primary residence and apply to acquire another property;
- Where the issuance of such a permit would be contrary to the political interests of Switzerland.
Consequences of non-compliance with the rules on obtaining a permit
Such a transaction will be deemed null and void, and the registrar is entitled to refuse its registration.
Moreover, deliberate avoidance of obtaining a permit to acquire real estate, the provision of false information, or refusal to provide information constitutes a criminal offence.
Therefore, prior to purchasing real estate in Switzerland, it is recommended to consult a lawyer.
Author: Yaroslavna Zadesenskaya, Aleksei Molchanov
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