Switzerland: Brexit results in tightening of Swiss Lex Koller Rule for UK citizens, though limited grandfathering applies

In brief

With Brexit becoming effective on 31 December 2020, UK citizens no longer benefit from the preferential treatment of EU citizens with respect to the acquisition of Swiss residential real estate. UK citizens now need a Swiss permanent residence permit to purchase Swiss residential real estate properties without a permit. However, a grandfathering applies: UK citizens legally and effectively residing in Switzerland prior to 1 January 2021 remain exempt from that tightening, provided they maintain their legal and effective place of residence in Switzerland. Any Swiss residential real estate legally acquired by UK citizens before 1 January 2021 also remains grandfathered.


Options for UK citizens to acquire Swiss residential real estate from 1 January 2021

UK citizens without legal and factual residence in Switzerland on 1 January 2021:

  • In order to acquire Swiss residential real estate a Swiss permanent residence permit is required.
  • Prior to obtaining a Swiss permanent residence permit holiday homes can be acquired in certain cantons subject to receipt of a specific permit, as well as the private residence at the location of the legal and factual place of residence in Switzerland.

UK citizens with legal and factual residence in Switzerland on 1 January 2021:

  • These UK citizens are grandfathered and remain allowed to acquire Swiss residential real estate without a permit.
  • However, it is imperative that these UK citizens maintain their legal and factual residence in Switzerland, at least until the future acquisition of Swiss residential real estate. Any de-registration or shift of the factual residence from Switzerland after 1 January 2021 will result in the loss of the grandfathering.

Further exemptions

Pre-Brexit ownership in Swiss real estate

UK citizens who have legally acquired Swiss residential real estate before 1 January 2021 retain the right to own that property. Brexit has no effect on the legal situation regarding their Swiss residential real estate.

Pre-Brexit cross-border commuters

UK citizens who were cross-border commuters into Switzerland on 1 January 2021 and who have retained this status thereafter keep, for the purpose of acquiring Swiss residential property, their status after Brexit. They continue to benefit from the exception under the Lex Koller Rule, which allows cross-border commuters to acquire a secondary home in the region of their Swiss workplace.

Background

The so-called Swiss "Lex Koller Rule" prohibits the acquisition of Swiss real estate by foreigners unless the foreign buyer holds a permit. Due to the exemption of commercial real estate from the Lex Koller Rule, its main application lies with Swiss residential real estate.

Thanks to the bilateral treaties between Switzerland and the EU, the Lex Koller Rule exempts EU-foreigners from the permit requirement as soon as they have their legal and factual residence in Switzerland. Foreigners from non-EU countries do not benefit from that exemption and thus require a Swiss permanent residence permit in order to be allowed to acquire Swiss real estate without a permit.

Buying Swiss residential real estate with a permit is very much limited and permits are applied restrictively. Certain (touristic) cantons have a quota for permits to be allowed to buy holiday homes for self-use.

With Brexit, UK becomes a non-EU country. According to the international treaty between Switzerland and the UK of 25 February 2019, which was approved by Swiss parliament on 25 September 2020, the transition with respect to Swiss real estate is governed as follows:

  • Any real estate property legally acquired by a UK citizen in Switzerland prior to 1 January 2021 remains unaffected by Brexit.
  • Any UK citizen with legal and factual residence in Switzerland on 1 January 2021 remain allowed to acquire Swiss residential real estate without permit, provided they retained their legal and factual residence until the acquisition of the Swiss real estate.
  • Any UK citizen with a Swiss commuter status on 1 January 2021 and who have retained that status will be allowed to benefit from the exemption under the Lex Koller Rule and acquire a secondary home in the region of their Swiss workplace.

The approval of the Swiss-UK Treaty remains subject to a facultative referendum, which is very unlikely. If there will be no referendum by 14 January 2021, the Swiss-UK Treaty will formally enter into force on 1 March 2021. In the meantime, the Swiss-UK Treaty has already been applied on a pro-forma basis since 1 January 2021.

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