Investments in Swiss real estate are 'conservative' but reliable, focused on the long term, and are considered one of the best ways to diversify your investments on the international market. And finally, over the past 40 years, Swiss real estate has consistently increased in price by 3-4% per year.
Lex Friedrich Law in Action
The purchase of real estate by foreigners in Switzerland is strictly limited by the so-called Lex Friedrich law. A person whose permanent residence is outside Switzerland (non-resident) must obtain a special permit to purchase real estate. Annually, about 1,500 such permits are issued to foreigners throughout Switzerland, and they are distributed to those cantons that especially need tourism development and economic growth. The cantons of Valais, Graubünden, Ticino and Vaud have had the largest number of permits for several consecutive years.
A foreigner can buy and own only one property for personal use, and the living area of the premises must not exceed 200 square meters. All prospective buyers must prove that they currently have no other private real estate in Switzerland. These rules are recorded and fixed in the land register.
According to Swiss law, foreigners are prohibited from selling their residential property for 5-10 years. An exception may be made if the owner develops a health or financial problem – but only if he proves that these circumstances arose after the property was purchased. In addition, the owner is obliged to use the purchased property for at least three weeks a year.
As for land, purchasing plots for construction is a rather complicated procedure. To do this, one must live in Switzerland for a long period (at least 5 years), and also prove that the foreigner really needs this plot.
The reason for introducing all the above restrictions is that wealthy foreign investors bought too much high-end real estate (for example, on the shores of lakes), and eventually this situation ceased to suit local residents and the country's authorities.
Buying a home does not automatically guarantee permanent residence. In Switzerland, immigration does not exist in the same form as, for example, in the United States of America. A foreign citizen who has purchased a property can stay in Switzerland on a tourist visa for up to 6 months a year (twice a year for 3 months). If he intends to stay in Switzerland longer, he must submit documents for a residence permit in the relevant canton.
Any foreigner who wants to stay in the country longer than the usual period must obtain a permit called Aufenthaltsbewilligung (residence permit), which is issued for a specified period of time. A permanent residence permit (Niederlassungs-Bewilligung) will only be granted after several years.
The procedure for buying real estate in Switzerland consists of several stages: signing a letter of intent; transferring a deposit to reserve the property; transferring the purchase price to the account of an independent notary (who processes the transaction in Switzerland); registration in the land register of property rights.
The owner of residential real estate in Switzerland has the right to rent it out for up to 11 months a year. The exact rental periods are specified in the contract between the management company and the apartment owner. This document stipulates the general rental prices and other payments. However, the main reasons for buying residential real estate should be personal in nature, and not tied to the desire to subsequently rent out one's apartment.
Property Taxes
The Swiss tax system is currently the most attractive in Europe and provides more favorable conditions for both companies and individuals. The property tax in Switzerland is 0.3-0.5% of the invested funds. The land tax is 0.2-0.6% of the assessed (tax) value of the property. The country has a progressive tax system: depending on income level, the income tax for individuals (as well as the profit tax for organizations) can range from 12% to 39% (the higher the income, the higher the tax).
The tax in Switzerland is three-tiered, that is: municipal, cantonal and federal.
Commercial Real Estate
The purchase of commercial real estate in Switzerland (for example, office and production premises, hotels, etc.) involves no restrictions either on the choice of region (canton) or on the resale period. No permit is required to purchase commercial real estate - any foreign investor can acquire an unlimited number of commercial properties.
Commercial real estate is interesting from the point of view of long-term investment as a hedge against inflation and a stable capital investment. In addition, investments in commercial real estate imply a stable annual income (for example, from rental payments). The yield of commercial buildings in Switzerland ranges from 7% to 10% - depending on the region.
Lease agreements are concluded with tenants, as a rule, for 5 years with the possibility of extension for the same period. The management company takes care of all insurance, maintenance and upkeep of the building, as well as managing utility bills, managing contractual relations with tenants, if necessary, finding new tenants, etc. The services of a management company cost on average 4-5% of the annual rental income.
Another "plus" of investing in commercial real estate is the possibility of registering the purchase under a company. This ensures confidentiality, as the owner's name does not appear anywhere (even in the property rights register).
Doing Business
In Switzerland, all sectors of the economy are open to foreign investment. Foreign investors are allowed to establish local companies and participate in their management. However, one of the founders must be a Swiss individual or legal entity, and the company's manager must be a resident of the country or a foreigner who has the right to work in Switzerland. For the purposes of acquiring real estate in Switzerland, capitalizing a company, protecting assets, and tax planning, it is recommended to register a new firm.
The most commonly used legal form in Switzerland is the joint-stock company, which has a clear priority when obtaining financing, concluding large contracts, etc. The minimum authorized capital is 100,000 Swiss francs, and at the time of company registration, at least 20% of the shares must be paid up (but not less than 50,000 Swiss francs). The minimum number of participants is three. A joint-stock company requires an annual audit. The cost of maintaining it ranges from 10,000 to 20,000 Swiss francs per year, depending on the level of business activity.
A simpler and more preferable form of enterprise in Switzerland, if the founders do not have far-reaching plans involving attracting significant capital from external sources, going public, etc., is the limited liability company. The minimum authorized capital is 20,000 Swiss francs, and at the time of registration of the enterprise, at least 10,000 must be paid up. The minimum number of participants is two. The advantages of an LLC include a smaller authorized capital, a simple management procedure, and a lower cost of annual maintenance (usually from 6,000 to 12,000 Swiss francs per year).
Opening a new firm or representative office of a foreign company in Switzerland provides the opportunity to work there and obtain a residence permit. At the same time, the company must conduct active operations, create new jobs, and make a certain contribution to the development of the country's economy.