Citation: Céline Martin, The Swiss taxation of real estate transactions in an international context, in zsis) 4/2025, A14, N [...] (publ.zsis.ch/A14-2025)
The Swiss real estate market is becoming an increasingly attractive investment destination for foreign investors. This article provides an overview of the key tax considerations related to cross-border real estate transactions, particularly with regard to investments in commercial real estate and the tax treatment of the sale of shares in a Swiss real estate company.
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The Swiss real estate market is becoming an increasingly attractive investment destination for foreign investors. This article provides an overview of the key tax considerations related to cross-border real estate transactions, particularly with regard to investments in commercial real estate and the tax treatment of the sale of shares in a Swiss real estate company.
When investing in commercial real estate through the purchase of shares in the operating company (e.g., in the hospitality or healthcare sectors), a restructuring of the company’s management by the buyer is often under consideration. If the ongoing business for which the property served as a basis is discontinued by the buyer and the property is repurposed (or the building is demolished and rebuilt for a different use), Swiss practice suggests that the company will be classified as a real estate company, and property taxes will be due upon sale. However, if the existing business is continued under a modified legal and organizational structure, recent practice of the Federal Supreme Court suggests that the sold company does not lose its character as an operating company, meaning that no property taxes are levied upon sale. Due to varying cantonal practices, however, a careful preliminary assessment is essential.
In connection with the sale of shares in real estate companies, attention should be drawn to the differing tax treatment resulting from the applicable DTA between Switzerland and the seller’s country of residence. If the applicable DTA contains a provision regarding the sale of shares in companies whose assets consist primarily of real estate, the tax treatment can generally be determined without doubt. In the absence of such a provision—as is the case in Switzerland’s DTAs with Germany, Luxembourg, and other jurisdictions—the question arises as to whether a right of taxation in favor of Switzerland, as the location of the sold real estate, can be derived through interpretation. Based on international law, the internationally applicable rules of interpretation for treaties, and the established practice of Swiss courts, this must be denied, and the right to tax (from the sale of movable property) remains with the seller’s country of residence.
Finally, the article briefly addresses specific issues during the holding period of the investment, in particular ongoing taxation and the allocation of a deduction for interest on debt, as well as resulting conflicts, intra-group restructurings, and financing transactions involving withholding tax on interest from mortgage-secured loans from foreign creditors.
The Swiss real estate market is becoming an increasingly attractive investment destination for foreign institutional investors and funds. Positive price trends coupled with stable outlooks enhance its appeal in the international investment market and place Swiss real estate at the center of cross-border investment and sale transactions.
This article first introduces the key tax aspects related to real estate transactions with a cross-border dimension. This is followed
