A brief guide to the key legal and tax considerations

In addition to its appeal as a holiday destination, Switzerland is attractive to foreigners because of its political and legal stability, low crime rate, excellent medical facilities and the quality of its educational and cultural offering. There continues to be significant demand from non-residents seeking to acquire property in Switzerland and its real estate market has enjoyed stability and growth. This note provides a brief overview of the key legal and tax considerations that are relevant for non-residents considering purchasing real estate in Switzerland.

The legal restrictions

The purchase of real estate in Switzerland by non-residents has been restricted since the 1960s. Over the years, these rules have been subject to various changes and liberalizations. Today, these rules are set forth in the “Federal Law on the Acquisition of Real Estate by Persons Abroad”, also known as the Lex Koller. The Lex Koller restricts the purchase of certain types of real estate in Switzerland by foreigners, foreign-based companies and Swiss-based companies controlled by foreigners (referred to collectively herein as “non-residents”). There is another important restriction which is known as the Lex Weber. Enacted in 2013 following a referendum narrowly passed in 2012, this act limits the number of secondary residences in tourist areas to a maximum of 20%.

In this note we focus on the Lex Koller which imposes the principal restrictions on foreigners seeking to buy Swiss real estate. Under the Lex Koller, non-resident individuals are defined as:

  • Foreign nationals living outside Switzerland.
  • Foreign nationals living in Switzerland who are neither citizens of the European Union (“EU”) nor European Free Trade Association (“EFTA”) member states, nor Swiss permanent residents (holders of C residence permits).

We will address the restrictions imposed on foreign nationals living outside Switzerland.

As for legal entities, the Lex Koller considers entities to be non-residents if they are:

  • Incorporated abroad, even if they are held by Swiss citizens.
  • Registered in Switzerland but under foreign control, whether corporations or partnerships. Foreign control applies when non-residents hold more than one-third of the capital of the company or have more than one-third of the voting rights. Moreover, foreign control is assumed when non-residents provide significant debt capital to an entity.

The Lex Koller distinguishes several types of real estate including (i) primary residences, (ii) holiday homes, (iii) secondary residences and (iv) commercial properties.

Primary residences

In general, non-resident foreign individuals may not purchase land and/or property to use as a primary residence.

Holiday homes

A non-resident may acquire a holiday home in Switzerland upon receipt of an authorization from the canton where the property is located. The purchase must also fall within the annual permit quota for the relevant canton and commune. Across Switzerland, 1,500 quotas for holiday homes may be issued to non-residents annually. This quota is allocated annually by the Swiss government based on a number of factors including the number of tourism facilities and new developments.

The canton must also have a law permitting foreign ownership of holiday properties and must have clearly defined the regions where these acquisitions are possible. Such holiday homes are generally limited to a maximum net floor space of 200m2 and 1,000m2 of land (in accordance with current practice, up to 250m2/1,500m2 will be granted if the need is demonstrated). Higher limits may be approved exceptionally. For this purpose, net floor space includes all liveable space, hallways, hobby rooms, saunas and indoor swimming pools. Balconies, stairwells, cellars and attics are not taken into account for this calculation.

Non-residents may only acquire a holiday home in their own name – in other words, acquisition through an entity is not allowed. Moreover, the holiday home may only be rented out occasionally on a limited basis. A non-resident is only allowed to have one holiday home in Switzerland – for this purpose a holiday home owned by a spouse/registered partner as well as children under 18 will be taken into account.

Secondary residences

There are two limited exceptions whereby a non-resident may acquire a secondary residence in Switzerland. First, an EU or EFTA citizen who commutes crossborder to work in Switzerland may acquire a secondary residence in the area of his place of work subject to certain limitations. Second, in certain cantons, a non-resident may be authorized to acquire a secondary residence in Switzerland on the basis of exceptionally close economic, scientific or cultural ties that are worthy of protection. This exception is extremely limited and we note that relationships to persons in Switzerland – through blood or marriage – as well as study, recuperation or holiday stays do not constitute exceptional ties.

Commercial properties

There are no restrictions for non-residents buying real estate for commercial purposes. A commercial property is not required to be used for the buyer’s business and may be rented out to a third party. Moreover, commercial real estate may be purchased solely for investment purposes.


Real estate transfer tax

A real estate transfer tax may be levied by the cantons and/or municipalities on the purchase price of real estate and is normally payable by the buyer. The amount of the tax varies from one canton to another but generally ranges from 1% to 3.3%.  Certain cantons, such as Zurich and Zug, do not impose real estate transfer tax (but in practice this is often compensated with higher charges for registering the transaction in the property register).

Property tax

Property tax is levied annually by certain cantons or municipalities on the full taxable value of the property, without taking into account any property financing or mortgage. It is due by the owner recorded in the land registry. Generally the property tax rate is 0.01–0.03%.

Income tax and wealth tax

All owners of Swiss real estate, including non-residents, are subject to an annual income tax on the “deemed rental income” of the property. This “deemed rental value” is regularly estimated by the municipal or cantonal authorities. The income tax rates vary from canton to canton and from municipality to municipality.

In addition, non-residents owning Swiss real estate are subject to annual wealth tax. All cantons and communes levy a wealth tax based on net wealth. From a real estate point of view, net wealth corresponds to the “taxable” value of the property (generally a discount of the real value) less debts (mortgages) for wealth tax reasons.

Capital gains taxes

The sale of real estate situated in Switzerland that is held directly (in other words, not through an entity) will generally trigger capital gains tax at the cantonal level and sometimes also at the municipal level. The taxable gain is calculated on the basis of the difference between the sale price and the acquisition price, including the cost of alterations. Tax rates vary greatly by canton, and effective tax rates are predominantly influenced by the amount of the gain, the location of the real estate and the length of time the seller has held the property. Notably, there are surcharges for short holding periods that could lead to high profits realized over a short period being taxed at a rate higher than 50%. We note that some cantons have minimum holding periods – generally five years – during which property owned by a non-resident may not be resold.

Inheritance and gift taxes

Upon the non-resident owner’s death, or if an owner gifts the real estate during his lifetime, inheritance/gift tax may be due based on the property’s value at the time of the death/gift. The tax is to be paid by the heir/donee as the case may be. Swiss inheritance tax and gift tax is levied by the cantons and, in some cases, the municipalities (not at the federal level). While rates and laws vary, all cantons exempt a surviving spouse from inheritance and gift taxes and most cantons also exempt direct descendants from such taxes. Canton Schwyz and Canton Obwalden levy neither inheritance nor gift taxes and Canton Lucerne levies no gift taxes.

While Swiss tax may be due upon the transfer of the property for tax purposes we note that from an inheritance law perspective, Swiss law, including the Swiss forced heirship rules, should not apply in the case of a non-resident of Switzerland holding Swiss real estate at his death. Rather the laws of the country of the deceased’s last place of domicile should be consulted.

Transactional steps

The transactional aspects of entering into a contract to purchase real estate in Switzerland are relatively straightforward. The notary plays an important role as all agreements relating to the sale of real estate must be notarized in order to be valid. First, a letter of intent will be signed by the parties, outlining the terms of the transaction and the purchaser will also make a deposit which typically is received by the real estate broker or the notary. If needed, the notary will then apply to the cantonal property office for a permit to purchase the property. Finally, the contract of sale must be signed by the notary, seller and the buyer. Transfer of ownership only takes effect when the new owner has been entered into the land registry.


The information provided in this note remains brief and is intended to flag some of the issues to be considered in the case of a non-resident acquiring Swiss real estate. J.P. Morgan recommends purchasers to seek tax and legal counsel both in Switzerland and in the purchaser’s home country.

Your J.P. Morgan Wealth Advisor is available to assist your professional advisors.

At a glance: Rules governing non-residents’ purchase of Swiss residential property