Our Lex Koller legislation guide provides an initial overview regarding the acquisition of real estate in Switzerland. It goes without saying that it is not a substitute for the advice which can be given by legal and tax advisors. If you are planning to acquire real estate in Switzerland, then you should use the services of a specialist law firm.
1. On the origin of the lex koller
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. Which purchasers are subject to Lex Koller legislation?
The law states that “foreign nationals” are subject to Lex Koller legislation. This includes 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
- 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 types of real estate can foreign nationals acquire without problems?
There are some important exceptions and options which allow foreign nationals who are resident abroad to acquire properties or building land in Switzerland despite Lex Koller legislation. Our infographic highlights exceptions and explains them in more detail in the coming sections.
1st exception: Real estate which is used for commercial purposes and business establishments
No authorisation is required if the real estate is used for the following purposes:
- Permanent business establishment for a commercial or manufacturing enterprise
- Enterprises which are operated commercially
- Liberal professions
- Doctors’ surgeries
Such purchases are only problematic where the property is used for both commercial and residential purposes. Apartments which are part of a commercial property may only be acquired without prior authorisation in exceptional cases. This is, for example, the case if they are necessary for business or it would be unreasonable to separate them from the business area.
In addition to this, mixed use properties which include living accommodation amounting to at most 50 percent of the property may be acquired if the property is located in a zone which is subject to minimum residential quotas. The number of apartments may, however, not exceed the required minimum residential quota.
2nd exception: Non-Swiss nationals who are resident and pay tax in Switzerland
Under the terms of the Lex Koller the following persons are considered to be resident in Switzerland:
- EU/EFTA nationals who are legally and actually resident in Switzerland and hold
type B residence permits
- Nationals of other countries who hold valid type C permits
Both of these groups therefore have the same status as Swiss nationals with regard to the acquisition of real estate and require no authorisation to purchase any kind of property. This also applies, for example, to apartment buildings or second homes.
Nationals of other countries (non-EU/EFTA nationals) who do not hold a type C residence permit but are resident in Switzerland may purchase an apartment or a house in their actual place of residence. These purchasers must, however, live in the property and cannot rent it out, even in part. Where purchases of apartments or houses are deemed valid, purchasers are not required to sell the property if they subsequently leave the country or move to another location in Switzerland.
In all cases it is key that the buyer not only has the required residence permit and tax domicile but is also actually resident in Switzerland. When demanding proof of residence the authorities may request evidence regarding the place of residence of a spouse/partner and minor children; a social life based in Switzerland (clubs, etc.); registration of any vehicles in Switzerland; etc.
3rd exception: Swiss real estate companies and investment funds
The acquisition of shares in a real estate company which is listed on a Swiss stock exchange is not subject to Lex Koller legislation.
Non-Swiss nationals are not permitted to acquire shares in real estate companies which are not listed on a Swiss stock exchange and whose purpose is to acquire or hold residential real estate or other real estate which is not used for business purposes.
The percentage of real estate held by the company which requires authorisation is a key factor in this regard. Since there is no specific threshold value, authorisation is required for residential real estate percentages ranging from 10 to 20 percent.
4th exception: Holiday apartments in individual cantons
In some cantons the purchase of holiday apartments is exempt from the authorisation requirement (Lex Koller-exempt). These cantons are Appenzell Ausserrhoden, Bern, Freiburg, Glarus, Grisons, Jura, Lucerne, Neuchâtel, Nidwalden, Obwalden, St. Gallen, Schaffhausen, Schwyz, Ticino, Uri, Vaud and Valais.
There are, however, threshold values for area sizes: The plot must be less than 1,000 square metres and the net living area less than 200 square metres in size. Living area is defined as all habitable and heated rooms including saunas, swimming pools and hobby rooms but not balconies, stairwells, cellars and attics.
The acquisition of holiday apartments by non-Swiss nationals is subject to a quota which applies for the whole of Switzerland. Only 1,500 holiday apartments a year may be sold to foreign nationals who are not resident in Switzerland, whereby the number of apartments available in each canton varies significantly.
Valais, for example, has a quota of 330 apartments per year, while the quota for Appenzell Ausserrhoden, Uri, Nidwalden, Obwalden, Glarus, Jura and Schaffhausen is only 20 each. Any purchase of a holiday apartment must thus fall within the relevant quota. In recent years most cantons have had sufficient capacities within the scope of their quotas.
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4. Lex Koller legislation for legal entities
Legal entities are also subject to Lex Koller legislation. They are thus also required to obtain authorisation to purchase real estate.
The Lex Koller applies to foreign legal entities. These are defined as:
- Companies which are headquartered abroad, independent of whether Swiss nationals or
persons resident abroad hold shares in them.
- Companies which are headquartered in Switzerland if they are controlled either directly or
indirectly by persons resident abroad.
A so-called ‘dominant position’ in a company or legal entity exists if persons resident abroad:
- Hold more than one-third of the company’s capital,
- Hold more than one-third of the voting rights, either directly or indirectly, or
- Have granted the company loans to a specific value.
Where this is the case, persons resident abroad must also obtain authorisation from the relevant authorities before they are permitted to acquire real estate in Switzerland.
The exceptions already mentioned above also apply here - particularly that the acquisition of real estate used for permanent business establishment purposes/manufacturing/workshops is exempted from Lex Koller legislation.
The acquisition of real estate for the purpose of constructing or leasing housing in Switzerland is, in contrast, excluded.
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