The Lex Koller Rules: Where Foreigners Can (and Cannot) Buy in Switzerland

Foreigners can buy residential property in Switzerland provided the property is located in a designated tourist zone, is a holiday home, or if the buyer holds a specific Swiss residence permit. The process is governed by the Lex Koller legislation, which limits the acquisition of Swiss real estate by non-residents to prevent over-speculation and ensure housing remains available for locals.

Key Takeaways

• Lex Koller Compliance: Non-residents are generally prohibited from buying residential property in major economic hubs like Zurich or Geneva unless they hold a C Permit or meet specific exemption criteria.
• Tourist Zones: Most foreign buyers focus on designated tourist cantons such as Valais, Vaud, Ticino, and Graubünden, where quotas for holiday homes exist.
• Lex Weber Restrictions: In addition to Lex Koller, the Lex Weber law restricts secondary residences to 20 percent of a municipality’s total housing stock.
• Commercial Exemption: Acquisition of commercial real estate (offices, retail, warehouses) is largely exempt from Lex Koller restrictions for all nationalities.
• Permit Status: EU/EFTA citizens with a B Permit and all foreigners with a C Permit have nearly the same buying rights as Swiss nationals.

What is the Lex Koller Legislation?

The Federal Act on the Acquisition of Immovable Property by Persons Abroad, commonly known as Lex Koller, was introduced in 1983. Its primary objective is to restrict the purchase of Swiss land and housing by non-residents to prevent foreign capital from inflating the domestic market. For the High Net Worth (HNW) investor, understanding Lex Koller is the first step in any Swiss real estate acquisition strategy.

Under this law, a "Person Abroad" includes anyone who does not have the right to reside in Switzerland or who is not domiciled there for tax purposes. According to the Swiss Federal Office of Justice, the law applies to both individuals and legal entities controlled by persons abroad.

Who is Classified as a "Person Abroad"?

To navigate the Lex Koller rules, one must first determine their legal status in the eyes of the Swiss authorities. The restrictions vary significantly based on nationality and residency permit status:

1. Swiss Nationals: No restrictions regardless of where they live.
2. EU/EFTA Citizens with Swiss Residence (Permit B or C): These individuals enjoy the same rights as Swiss citizens and do not require a Lex Koller permit to buy residential property as their primary home or as an investment.
3. Non-EU/EFTA Citizens with a C Permit: These individuals are treated as Swiss nationals for the purposes of real estate.
4. Non-EU/EFTA Citizens with a B Permit: They may buy a primary residence to live in without a permit, but they cannot generally buy investment properties or holiday homes without specific authorisation.
5. Non-Residents: This category faces the strictest limitations and must apply for a quota-based permit, usually limited to designated holiday zones.

Where Can Foreigners Buy Residential Property?

If you do not hold a Swiss residence permit and reside outside the country, your options are limited to "holiday homes" in specific cantons. The Swiss government allocates an annual quota of approximately 1,500 permits across the entire country for sales to non-residents. These are primarily found in mountain resorts and tourist areas.

The Tourist Cantons

Foreigners are typically permitted to buy in the following cantons, though municipal rules vary:

• Valais: Popular locations include Verbier, Zermatt (with restrictions), and Crans-Montana.
• Vaud: Areas like Montreux and Villars.
• Graubünden: Home to St. Moritz and Davos.
• Ticino: The Italian-speaking region, including Lugano and Locarno.
• Berne: Specifically the Bernese Oberland, including Gstaad and Interlaken.

In these areas, the property must be designated as a holiday home. There are often restrictions on the size of the plot (usually up to 1,000 square metres) and the living area (usually up to 200 square metres of net floor space).

What is the Impact of Lex Weber on Modern Buying?

While Lex Koller dictates who can buy, Lex Weber (the Second Homes Act) dictates what can be built. Introduced after a 2012 referendum, Lex Weber prohibits the construction of new secondary residences in municipalities where second homes already account for more than 20 percent of the total housing stock.

For an international investor, this means that the supply of new-build holiday apartments in popular resorts like Verbier or St. Moritz has essentially dried up. Consequently, buyers must look at "grandfathered" properties built before 2012 or those that were already designated as secondary residences. This has led to significant price appreciation in the resale market.

Are Commercial Properties Exempt from Lex Koller?

One of the most significant opportunities for HNW investors lies in commercial real estate. Lex Koller was significantly liberalised in 1997 regarding business premises. Foreigners, whether resident or not, can generally buy commercial property without a permit. This includes:

• Office buildings
• Manufacturing plants and warehouses
• Retail outlets and shopping centres
• Hotels and restaurants

As long as the property is used for a legitimate business activity, the restrictions that plague the residential sector do not apply. This makes Swiss commercial REITs and direct property ownership a stable hedge for international portfolios.

Comparison of Buying Rights by Status

The Application Process for a Lex Koller Permit

If you are a non-resident purchasing a holiday home in a designated zone, the process typically follows these steps:

1. Selection: Find a property that already has a permit for sale to foreigners or is in a zone where permits are available.
2. Notary Involvement: In Switzerland, the notary represents both parties and handles the permit application to the Cantonal Authority.
3. Cantonal Review: The authority checks if the quota for the year has been reached and if the buyer meets the personal criteria (not already owning a home in Switzerland).
4. Federal Oversight: While the canton issues the permit, the Federal Office of Justice maintains oversight.
5. Completion: Once the permit (the "Authorisation for Acquisition") is granted, the title transfer is recorded in the Land Registry (Grundbuch).

This process usually takes between two to four months. It is vital to note that a non-resident cannot own more than one holiday home in Switzerland at a time.

Can a Foreigner Buy Professional Real Estate?

There is a niche exemption for those purchasing real estate as a permanent establishment for a trade or business. If a foreign company requires housing for its employees or a facility for its operations, the Lex Koller rules may be waived. However, the Federal Supreme Court is strict on ensuring these acquisitions are not disguised residential investments.

Common Pitfalls and Restrictions

Investors often underestimate the granularity of Swiss law. For instance, even if you are allowed to buy, you may be restricted from renting out the property on a long-term basis. Holiday homes are generally meant for the owner's use, though short-term seasonal rentals are frequently permitted to help cover maintenance costs.

Furthermore, if you buy a property through a company, the company is also subject to Lex Koller. You cannot bypass the law by simply incorporating a Swiss AG if the ultimate beneficial owner is a person abroad.

Summary for the Global Investor

Switzerland remains one of the world's most stable jurisdictions for wealth preservation. While Lex Koller presents a barrier to entry for the residential markets of Zurich, Geneva, and Zug, it also protects the value of the assets by preventing artificial bubbles. For those seeking a lifestyle asset, the Alpine regions remain accessible. For those seeking yield and capital growth, the commercial sector offers a clear, unrestricted path.

Disclaimer: This article does not constitute legal or tax advice. The Swiss legal landscape is complex and subject to change. Readers should consult with a qualified Swiss lawyer or tax advisor before entering into any real estate transactions.

Frequently Asked Questions

Can I buy an apartment in Zurich as a non-resident?

No. Zurich is not a designated tourist zone, and residential property there is strictly reserved for Swiss nationals and residents with appropriate permits. Commercial property in Zurich, however, can be purchased by non-residents.

How long must I keep a property before selling?

Many cantons impose a "speculation period," often five to ten years. If you sell before this period ends, you may face significantly higher capital gains taxes (Immobiliensteuer) and, in some cases, you may need to prove there was no intent to speculate to the Lex Koller authorities.

Does owning property in Switzerland give me residency rights?

No. Unlike "Golden Visa" programmes in countries like Portugal or Greece, purchasing property in Switzerland does not grant any rights to a residence permit or citizenship. Residency is typically obtained through employment, retirement (for those over 55), or a lump-sum tax agreement.

Is there a limit on the price I can pay?

There is no legal upper limit on the price, but there is a limit on the size. Typically, non-residents are limited to properties with a net living area of 200 square metres or less, although some cantons allow up to 250 square metres in exceptional cases.

What are the closing costs for Swiss property?

Closing costs vary by canton but generally range between 2.5 percent and 5 percent of the purchase price. This includes notary fees, land registry fees, and property transfer taxes (Handänderungssteuer).